What are War Babies?
War babies are securities issued by companies in the defense industry.
How Do War Babies Work?
Let's assume Company XYZ builds jets for the Navy, and Company ABC builds guns for the Army. Both are public companies, and both are borrowing money by issuing bonds. The stocks and bonds of these companies are called war babies.
Why Do War Babies Matter?
War babies are securities from companies that create tools, services and intelligence needed during war. Accordingly, when a country is at war or may go to war, companies like Company XYZ and Company ABC will sell more and thus profit more. In turn, the value of their securities will likely rise.
Conversely, war babies will usually lose value when conflicts decrease or cease. However, it is important to note that even when a country is not at war, governments are still interested in maintaining their defenses and will thus usually have some level of consistent business for these companies. It is also important to note that these companies have an unusual kind of risk -- they largely depend on one customer (the government).
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
Most income investors are familiar with the tax treatment of common distributions like qualified and unqualified dividends....
Read More →
Investors have a wide variety of tools and tactics to help extract profits from the markets. The majority of these tools boil down to two distinct categories: fundamental...
Read More →
Buckle up and hold on -- a new round of quantitative easing is here and things could start getting very ugly in the financial world over the coming months. The truth is that many...
Read More →
Americans are hardly feeling contented these days. Washington is a mess, jobs are scarce, and the weather's gone wild. But at least the United States is still the largest ...
Read More →
When I looked for my first mortgage, I was skeptical about rates that were too low. There had to be a catch when one mortgage had a rate...
Read More →
