Investors are increasingly eyeing opportunities in the defence sector, particularly with the UK government’s focus on enhancing security measures. One stock that has drawn attention is Cohort PLC (LSE:CHRT), which has not participated in the recent surge of defence stocks but may still present a viable investment option before the year concludes.
Cohort, which operates as a collection of smaller businesses, does not manufacture weapons or machinery. Instead, its subsidiaries are involved in vital areas like surveillance, threat detection, and cybersecurity. This aligns closely with recommendations from the UK’s 2025 Strategic Defence Review, which identified these sectors as key investment themes for future growth.
Despite the promising context, Cohort’s latest financial results fell short of expectations. The company anticipates earnings before interest and taxes (EBIT) will be lower than last year’s robust performance. Nevertheless, it maintains its guidance for full-year revenues of £291 million and EBIT of £35 million. With a market capitalisation of approximately £523 million, these figures may make the stock appealing to potential investors.
Business Strategy and Market Position
Cohort’s business model is built around acquiring smaller companies and facilitating their growth through financial backing and market entry support. This decentralised approach allows for operational flexibility, enabling subsidiaries to respond quickly to customer needs. While this strategy carries some risks—such as potential oversight issues—it has proven effective for Cohort so far.
Notably, companies that adopt similar acquisition strategies, such as Halma and Diploma, have seen significant success in the UK market. Both firms have been among the top performers in the FTSE 100 over the past decade. With the anticipated increase in defence spending, Cohort may also benefit from a favourable market environment.
While there is no guarantee of success with this approach, Cohort’s track record suggests it is well-positioned to seize opportunities that larger private equity firms might overlook.
Current Market Trends and Future Outlook
Cohort’s share price has experienced a decline since mid-2023. At its peak, the stock traded near £18, which some analysts deemed overpriced. Currently, trading around £12, the stock presents a more attractive investment proposition. Should the price remain stable through December, it may warrant serious consideration for inclusion in a Stocks and Shares ISA.
The UK boasts several distinguished companies that specialise in acquiring and nurturing businesses. Among them, Cohort stands out as a compelling option in the current market landscape. Investors looking for growth opportunities in the defence sector should pay close attention to this stock as the year draws to a close.
As investment expert Mark Rogers notes, identifying promising stocks can yield significant returns. Those interested in understanding whether Cohort PLC aligns with their investment strategy may want to explore this opportunity further, particularly in light of the expected rise in defence funding.
