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Buy any weakness on defense stocks as Biden won't be bad for the industry, Citi says

A file photo from September 2007 showing then-Senator Joseph Biden speaking to U.S. Marines during a visit to Ramadi, Iraq.
John Moore | Getty Images

Investor fears that a Democratic Congress and White House could lead to significant defense budget cuts are overblown and offer an opportunity to buy beaten-down names, according to Citi.

Analyst Jonathan Raviv told clients that recent underperformance in stocks like Mercury Systems and electronic weapons supplier L3Harris should be bought given the composition of the Senate.

"We're buyers of any weakness since we don't think [President-elect Joe] Biden is actually that bad for defense," Raviv told clients last week. "He said in September that he doesn't foresee major budget reductions. And his national security nominees appear as if they'll focus on a smaller, more technologically-advanced military to face rising challenges."

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