The cold, desolate lands bordering the Arctic Sea are heating up due to political tensions surrounding their strategic location, promises of natural resources, and new shipping lanes. Recently, friction centered around Denmark’s autonomous territory of Greenland has skyrocketed due to President Donald Trump’s publicly stated interest in the region and consequential NATO pushbacks. Worries of potential Russian or Chinese aggression in the Arctic also continue to rise. Specifically, satellite imagery has repeatedly captured Russian modernization of Siberian and Arctic military bases. Hingham High senior Bobby Kelly says, “I think [the Arctic] is going to basically be the battlefield in the future.” This “battlefield” Bobby refers to unlocks major opportunities, specifically in the investment field of defense.
BAE Systems, one of the world’s largest defense suppliers, stands out as perhaps the most enticing investment with growing geopolitical tensions in the Arctic. Since February of last year, BAE Systems (LON: BA) is up 63.68% from 1,305.00 GBX to 2,135.00 GBX. Despite the hefty price tag and recent stock increase, BAE Systems is a promising purchase for investors looking to capitalize on rising Arctic defense spending. One of the major strategic niches BAE has successfully captured is arctic-capable vehicles, designed to navigate difficult terrain in freezing weather. At the head of the Cold Weather All-Terrain Vehicle (CATV) sector is BAE’s Bvs10 Beowulf. This impressive unit has the ability to withstand the toughest conditions, and the United States Army recently selected it to replace its Arctic vehicle fleet. Furthermore, BAE has signed numerous contracts to extend its Beowulf production, so its influence in Arctic defense only continues to grow.
Beyond critically designed Arctic products, BAE is very diversified across several defense domains. They have been a major supplier to the United Kingdom’s Royal Navy and Air Force with innovative underwater and airborne vehicles, and BAE has established itself as one of the premier defense companies in terms of missile and sensor technologies.
When asked about Arctic defense investment, Hingham High graduate Bobby Peirce (Class of 2023), who now studies finance at Providence College, says, “Right now it has a lot of upside… pretty soon a ton of contracts will become available for [arctic defense]”. Luckily, BAE has already secured some preliminary deals, and they will likely be in a solid position for the future contracts Bobby refers to. Additionally, on February 18th, BAE raised its dividend by 10%, signaling an expectation of increased cash flows, which heavily benefits investors. As with any investment, BAE Systems carries some risk, especially with it being a defense company reliant on geopolitical tensions. However, its established production in the growing defense frontier of the Arctic, combined with its diversified products and promising stock increases, makes it a very enticing investment for investors.
