Wednesday, December 9, 2009

Ireland may be neutral but her money is not

Bloomberg recently ran a report looking at the returns earned by Irish Life, Ireland's biggest fund manager. The report begins:
Dec. 3 (Bloomberg) -- Irish Life Investment Managers, Ireland’s biggest fund company, is defending its top-ranked returns by investing in makers of military equipment.

Brendan Moran, who oversees 15 billion euros ($22.6 billion) as head of global equities at the Dublin-based company, bought Lockheed Martin Corp. and BAE Systems Plc because he predicts defense budgets will stay high.

“Their share prices haven’t gone up; the earnings haven’t come down,” Moran, 42, said in an interview at Bloomberg’s Dublin bureau. “As a consequence, they are more attractive to us on valuation.”

The U.S. government in October authorized a further $130 billion for military operations in Iraq and Afghanistan, bringing to more $1 trillion the amount spent since the Sept. 11 terrorist attacks. President Barack Obama said Dec. 1 he will send an extra 30,000 troops to Afghanistan next year.

The 12 members of the Standard & Poor’s 500 Aerospace & Defense Index trade at an average ratio of 13 times their earnings compared with an average 22 for companies in the Standard & Poor’s 500 Index.
Public opinion in Ireland is in favour of our neutrality stance. After the first Lisbon Treaty research conducted on behalf of the Department of Foreign Affairs indicated that uncertainty about Irish neutrality was a significant issue in the rejection of the Treaty. The Irish Defence Forces will not be sending any equipment or personnel for military operations in Iraq and Afghanistan. But we will be investing plenty of our money into the effort.

You can listen to a short interview with Brendan Moran here who airs his concerns about the impact changes in global defense budgets may have for his Irish investors. Neutral how are you!

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