Stock markets are continuing mild revivals in Wednesday business. The FTSE 100 is up 50-odd points, as I type, as investors, still buoyed by news of fresh Federal Reserve interest rate cuts yesterday, have stepped tentatively back into the market.
It’s clearly not the time to get too excited though. The Footsie is still around 800 points off the levels just before coronavirus panic set in. The COVID-19 infection rate also continues to climb with new cases emerging in previously unaffected countries. So there’s still plenty of scope for fresh bouts of weakness.
It pays, then, to remain well invested in so-called safe-haven stocks, i.e. those whose defensive utilities make them ideal picks for times of social, economic and political upheaval like these.
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A great safe haven
Defence company Avon Rubber (LSE: AVON) is one such flight-to-safety share I think’s worth buying today. I recently commented how BAE Systems is a worthwhile buy in today’s climate, owing to a global focus on defence, and thus the resilient nature of Western weapons spend.
The same can be said of this FTSE 250 share, a supplier of protective masks to militaries, police services and security services all over the globe. It’s why share price losses here have been minimal in the wake of the coronavirus outbreak and why, following modest gains in midweek trading, Avon is a mere whisker off February’s all-time closing highs of £27.80 per share.
Corking contract news
In fact, I’d say the release of exciting contract news in recent sessions cements its place as a brilliant share to buy in these uncertain times. First, Avon announced in late February it had received a £21m order from the US Department of Defense (DoD) under the ‘M69 Joint Service Aircrew Mask for Strategic Aircraft’ framework agreement.
And, just this week, Avon said it had been awarded a four-year, dual-source framework contract to supply the US Army with its ‘Vital Torso Protection X-Side Ballistic Insert’ body armour plates. First orders will come in 2021 (on receipt of product approvals) and the terms of the agreement will see Avon compete for each order of the $265m contract.
The deal spectacularly vindicates Avon’s recent decision to buy 3M’s ballistic-protection business, a move designed to boost the company’s links with the DoD and thus boost order levels. That latest contract bolsters Avon’s medium-term profits outlook and is a positive omen over what to possibly expect in this new decade.
A bright future
City analysts are certainly quite bullish over what to expect in the nearer term. They see Avon’s earnings rising 5% in the fiscal year to September, before ripping 17% higher next year.
Avon doesn’t come cheap. At current prices, it trades on a forward price-to-earnings (P/E) ratio of 28 times. I reckon this a worthwhile premium to pay though. Its market-leading products are selling like hotcakes across the globe. And rising geopolitical uncertainty should keep orders booming from major clients such as the DoD.
