WorldWideMarkets — Episode 685

8 July 2026 | Host: Simon Brown

Clean transcript, lightly edited for readability.

Worldwide markets this week: defence stocks as war rages and ammunition needs refilling — Lockheed Martin looks the pick. SK Hynix heads for the Nasdaq. Bending Spoons listed last Wednesday above the top end of the range. And an Equity Coverage AI Q2 review.

Hello and welcome to WorldWideMarkets. This is episode 685 for 8 July. I’m Simon Brown, recording Tuesday mid-morning. WorldWideMarkets is powered by Standard Bank Global Markets Retail and Shyft — the global money app that puts travel, shopping, payments and investments in the palm of your hand. Enjoy the cheapest forex rates anytime, anywhere. Shyft, powered by Standard Bank.

Thanks to Standard Bank, thanks to Shyft, and thanks to all of you for being here.

Bending Spoons

Last week we dug into Bending Spoons, and it did list. The range was $26 to $28, and it actually priced its IPO at $29 — ahead of the expected range — and listed on the Nasdaq. It’s trading up around $32.

I’m keeping an eye on it. I haven’t bought. I like the business, I just think that typically, post-IPO, within a couple of weeks or months, maybe a year, we’ll get a cheaper price on it. Let’s see what the story is. If you’re thinking “Bending who?”, just go to justonelap.com/wwm and you’ll find the Bending Spoons piece — there’s a report my AI bot generated that you can have a look at. I like the concept. Let’s see what they’re buying: nine-million-odd paying subscribers, half a billion monthly active users. I think there’s something there.

SK Hynix and the memory trade

Another quick point: SK Hynix is looking to list on the Nasdaq this Friday. It’s going to be a $28 billion listing — quite chunky. SK Hynix, of course, makes memory, and memory is the story of 2026. My emerging market ETFs are absolutely flying because of AI, not because of emerging markets — weird stuff, but there we are.

In the past you always had to go to South Korea to buy these, and most people simply can’t. So now suddenly you can get them via a secondary listing on the Nasdaq, and that should boost the price.

For me the question around memory is quite simple. At some point we’ll see demand plateau, and I don’t know how quickly that starts to happen — I think the demand is probably still there. We’re also going to see more capacity come into the market, and again that doesn’t happen in a hurry. So I think we’ve probably got another year or two, probably closer to two years, of these sort of price levels.

The problem, however, is whether they can push prices further, and I don’t think they can. What we’ve seen is that SK Hynix has sold its 2026 allocation of high-bandwidth memory and is busy selling 2027. I don’t know that they can push prices more. In other words, revenue is going to be broadly sideways for the next year or two, and then might start tapering off. I am not a buyer in this space. I’m happy where I am and I’ll stay exactly where I am. I’ve benefited from it because I own emerging markets, which is a little weird — didn’t see it coming, but the weirdest stuff has happened.

As I’m doing this, notifications are coming in for Power Hour events. There’s no Power Hour in July, but there is a One Invest event. We’re looking at commodities — where they’re going, what’s the future, how these ETFs work, why ETNs in some cases and not ETFs. We’re doing it with Johan Erasmus of One Invest and Standard Bank. Go to justonelap.com/events for more information and booking.

Defence stocks: the replacement thesis

So, defence stocks. Again, my AI bot made the report and I’ll publish it — you’ll find it at justonelap.com/wwm.

My interest in defence stocks is threefold. One: there are wars happening all over the place. Sure, the Middle East is calming down, with Iran and the US perhaps making peace, but the situation in Europe — Ukraine and Russia — is still going. So there are still wars out there.

Two: some of the stocks — Rheinmetall and others — that had absolutely flown have come back at an incredible pace, 30 to 40% down off those highs. That got me thinking: is there something here?

And three, the one I particularly wanted to focus on: in the US attack on Iran, a lot of hardware was burned that now needs to be replaced.

So I went and did a whole bunch of digging, and the short answer is yes. To be clear, the pronunciations are going to be weird here. But the US fired around 150 THAAD interceptors in twelve days of the war — that’s about half the stockpile gone. Almost half the Patriot PAC-3 interceptors are also being used and need to be replaced. That’s a cost.

The problem, of course, is that the US government is the single customer here. The name that keeps coming to the surface is Lockheed Martin, and the US government knows Lockheed Martin has only got one client — so can they squeeze them on margins? Yes. But the inverse is also true: Lockheed Martin knows the US government can only get this from them, so they can push margins too.

The replenishment is already contracted — a seven-year deal worth up to $35 billion to quadruple output of the THAAD missiles from 96 to 400 a year, plus 2,000 PAC-3 missiles. That plays out over the seven years. But that was already in place, and now they’ve gone and used a whole bunch, so they need to replace even faster. They can’t simply replace faster, though — there are processes here, much like the chips I mentioned a moment ago. This rebuild is going to take years rather than quarters. It doesn’t happen immediately.

There’s also the story of European countries post the invasion of Ukraine upping their defence spending. Europe is targeting 5% of GDP by 2035, with a 2029 review — so a lot can change there. Make no mistake, there are a lot of moving parts, but the short answer is: it’s happening. And Trump wants to lift the US budget from about a trillion to one and a half trillion. Again, that’s talk — we certainly haven’t heard anything firm.

US picks — Lockheed Martin and RTX

So where’s the key benefit? Lockheed Martin with THAAD and PAC-3, and then RTX with Patriot systems and some others. These are the replacement names — they’re not doing general stuff, they make particular missiles that have been used and need to be replaced. Of that there’s no doubt.

Let’s look at valuation. Lockheed Martin is the one that keeps coming into my brain. Forward PE is about 17 — it’s the cheapest by a way. Market cap is about $126 billion, and there’s a $194 billion backlog of orders behind that contract, coming through over many years.

Northrop Grumman make the B-21 bombers, which are now profitable, and they’re potentially re-rating. General Dynamics do Gulfstreams and submarines, also potentially re-rating. And then RTX — they’re the most expensive, but they’re the only one of the primary manufacturers who have raised guidance at this point. Lockheed Martin and RTX are definitely my picks there.

European names and Rheinmetall

On the European side, I suspect there’s going to be some tribalism — the US wants to buy from US companies and Europe wants to buy from European companies, and I think Trump will push that even harder.

Leonardo is by some way the cheapest European, on a forward PE of just under 20, and they’ve pushed their orders expectations up 15%. Thales — which we know in South Africa, they’re in court with our previous president — is the most expensive of the three on a forward PE of almost 23, but with strong earnings growth. BAE Systems have guided sales 10% higher, with an £84 billion backlog and FY26 revenues 7 to 9% higher. And Rheinmetall, which went crazy and has pulled back a lot, is on around a 30-times PE with revenue guided 30 to 40% higher.

The real difference between Europe and the US is growth versus value. Europe has faster top-line growth — absolutely, because they’re re-arming from a very low base. The US already had all of those numbers.

There’s always going to be customer concentration. Lockheed Martin is the US Pentagon — a reliable customer and a reliable payer, but a single customer. The European companies sell to many different customers, which diversifies the risk but adds coordination risk across 20-odd EU members, plus budget timing and all of that.

On backlog visibility: Lockheed Martin almost $200 billion, BAE £84 billion, Rheinmetall €64 billion and guiding towards €135 billion. There’s a lot happening here — but forward orders are only great if they convert. That’s what matters.

So what have we seen? US names have already started to re-rate, just in the last week, after lagging for much of the year. Inversely, European companies have run hard already — Rheinmetall is down 45% from its highs. So the cliché “easy money” in Europe has perhaps been made. On margins, US names typically run higher — they’re defence-only, they’ve got the scale, and they’ve had the regular client, whereas Europe’s clients have come late to the party.

So on value — and this is from my AI bot plus my own digging — I think the pick is Lockheed Martin. Nice and simple. Lockheed looks cheap in many regards, supplies tons to the US military, and all that ammunition burned in the war with Iran suddenly comes to fruition.

Lockheed Martin has 13 holds, one sell, five buys and two strong buys. I think those 13 holds create the opportunity here. The current share price is $538, the low target is $511, the average is $617 and the high is $756. This certainly is my pick in the space.

The dividend yield is 2.5%, which isn’t bad. Forward PE is 17-and-change, and the decade mean is just under 22 — so it’s looking fairly decent. The market is expecting only around 5% sales growth over the next three financial years. There are capacity constraints, no question, but I think those numbers are low. The one-year return has been 16% on the share plus another 3% for dividends. This stock has not done what we’ve seen from the crazy US names. Zoom the chart out and there’s not a lot happening — it’s up over five years, but it’s pulled back a lot from an almost-$700 high earlier this year.

Rheinmetall, in Frankfurt, was €2,000 and is now down to €1,100. But I think it’s expensive — it’s on a rolling historic PE of almost 50 and a forward of 27, expecting to grow revenues in the 30s to 40%. These are big numbers, and I think the market has priced a lot of that in. Although — target prices: the share’s at €1,130, the low is €1,300, the average is €1,741 and the high is €2,380. So the market is saying there’s a ton more to go here. Maybe there’s still something there for some of the Europeans, but I’m leaning to Lockheed Martin as my preferred.

The other interesting one is RTX — good quality, a good second choice. Slightly more expensive, but you’ve got direct replacement of Patriot missiles, SM-3s, SM-6s and PAC-3s. I don’t really know what I’m talking about when I say SM-3s, but it’s on my screen. In Europe, probably Thales and Leonardo — cheaper on forward earnings, less crowded, with good expectations — and maybe Rheinmetall has something because of the pullback.

Defence ETFs

But then the question comes: what about some ETFs? Because you know me, I’m always a fan — if there’s an ETF out there, couldn’t we do it that way?

There are a couple of ETFs in the theme. US-listed, there’s the iShares US Aerospace & Defense (ITA) — weirdly, Lockheed isn’t in its top couple of holdings, but it’s decent. Then the Invesco Aerospace & Defense (PPA), and the SPDR Aerospace & Defense (XAR). And finally the Global X Defense Tech (SHLD), which also brings in a couple of European names.

I probably prefer SHLD, simply because it’s giving me pure defence. I’m not so thrilled about the aerospace tilt — with ITA I get GE Aerospace, which I happen to like, but I also get Boeing, which I do not like.

In Europe you’ve got the WisdomTree Europe Defence — a pure Europe play — and then the Future of Defense ETF, whose ticker is NATO (I love the code), which brings in some cyber defence too.

So I like the idea of SHLD. Let’s have a look at it. It’s down from almost $80, currently trading at $64, with maybe a bit of support around the $60 level — it seems to have bounced off that for now. That’s the one I’d be looking at for an ETF. The thing with an ETF is you broaden the risk out but you pull back the return at the same time.

Some important points

Peace in our time — partly this is a play on replacement, which is the focus I particularly wanted to take. Budgets are politics, and politics can change. Valuations and execution are issues too, as are supply chains — rare earths out of China, for instance. A whole bunch can happen there.

At this point I hold no positions. I’ll PDF the report and put it at justonelap.com/wwm — look for the defence show and you can read it yourself. I like the theme. And to those of you who say defence is immoral — sure, if it’s not for you, it’s not for you, and that’s totally fine.

Equity Coverage AI: Q2 review

Before we head off: I’ve posted on my socials — LinkedIn, Facebook, Twitter, not Instagram — an update for Equity Coverage AI. We’ve had the second quarter, which is really our first full quarter, so we’ve published a whole lot around that.

We’ve now got 26 names in total: 22 buys, three holds and one sell. Our only sell rating is Premier Group — target 140, trading at 190. Quality name, but expensive. Invicta is a bit of a value trap, I suspect. I’m really liking Argent.

Some have already powered ahead — Karooooo, AdvTech, and Famous Brands, which surprised me because it wasn’t one that thrilled me. Omnia is a hold. Some are failing horribly against me — Nampak, and Pick n Pay are going badly. Oceana is doing well. Famous Brands was 51 when we initiated, for a 90 target, and at 84 it’s absolutely running — frankly quite wild. Even Astral Foods has been running nicely. We Buy Cars we also had as a hold.

I can hear a lot of you asking, “where do we get this?” I don’t know just yet. I’ve designed the structure and the AI equity research process, and it’s in place — but some of those reports are from versions 1.0, in fact 0.6, so I need to upgrade them. Then I need to decide the whats and wheres, and there are regulatory issues too: I’m not FSCA-qualified to do these, I don’t have ratings, none of that. But we’ll figure it out in time. For now we’ll chat about it on this show, and I’ll put some stuff out on my socials.

Sign-off

WorldWideMarkets is powered by Standard Bank Global Markets Retail and Shyft — the global money app that puts travel, shopping, payments and investments in the palm of your hand. Enjoy the cheapest forex rates anytime, anywhere. Shyft, powered by Standard Bank. Thanks to Standard Bank and thanks to Shyft for sponsoring us.

Remember that One Invest event on 28 July — a couple of weeks away, at 11am — looking at commodities and how they work, in particular the differences between ETFs and ETNs, and why some are ETFs and some ETNs. I can tell you: storage is the issue.

We’ll leave it there for now. My name is Simon. We’ll be back again next week. Until then, look after yourself and, as always, if you can, look after somebody else as well. Cheers all.