AllianceBernstein’s tank parts pick as European defense shares slip
AllianceBernstein is backing German global tank parts and transmissions maker Renk as a standout opportunity amid a sharp retreat in European defense stocks. Marcus Morris-Eyton, a portfolio manager at AllianceBernstein, said the sector’s recent selloff has created more attractive entry points into long-term military spending themes. European defense names were among the key winners in 2025. The Stoxx Europe Total Market Aerospace and Defense Index closed the year up 56.5%, boosted by the commitment by NATO members to increase their defense spending to 5% of GDP. But investor excitement around the continent’s defense “mega-trend” has since soured, with some names off between 20% and 30% from last year’s highs. “You’ve seen growing investor questions around the execution risk of that growing defense spending,” Morris-Eyton told CNBC’s “Squawk Box Europe” on Wednesday. Defense and national security remain a cornerstone of Germany’s landmark fiscal expansion, with Berlin pledging to ramp up military spending to at least 1% of its total GDP. Yet “inevitable” budget delays and “procurement bureaucracy” have hindered the progress of defense contracts there, Morris-Eyton said. As a result, certain German defense stocks that traded on “mid-to-high 30s” P/E multiples have reversed course and are now in the low-20s, he explained. That’s now throwing up attractive individual trades within the sector. “The market probably became a bit overheated, and now I think we’re at a more interesting level.” R3NK-DE YTD mountain Renk AG. Morris-Eyton highlighted Renk as a key portfolio pick. The Bavarian defense mainstay, which manufactures engines, gearboxes and other specialist parts for tanks, naval vessels and other combat vehicles, is the “the global market leader for tank transmissions”, he said. That chimes with AllianceBernstein’s preference for longer-cycle defense plays. “The beauty of that business model is that it’s very aftermarket-centric — once you sell the transmission you then have a 10- to 20-year aftermarket opportunity to harvest a very profitable growth profile,” he explained. “You’re not just selling one-off weapons and ammunition, where you have a very strong replenishment story but then that is done. You have that 20-year visibility once that tank transmission is sold.”
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