Many GovCon stocks have set continuous all-time highs since the Trump November election win. Nation Analytics and Celero Strategies are seeking to parlay that heightened interest from Wall Street through a new GovCon service.
Government contracting companies and in particular those in the defense sector have been a focal point of investor attention in the months since Donald Trump’s presidential election win.
This increased scrutiny of publicly-traded contractors on Wall Street has created a demand for information on how to approach investments in these companies and watch the sector, Nation Analytics co-founder Brian Friel told Washington Technology. Expectations of higher defense budgets and increased merger-and-acquisition activity have brought heightened investor interest in the federal sector, Friel said.
To meet that demand, the market research provider Nation Analytics has partnered with consulting firm Celero Strategies to offer a service for the investment community that offers custom reports with both competitive intelligence data and strategic advice. The target audience is those that have or are considering whether to take holdings in the GovCon arena.
Friel told Washington Technology his conversations with investors during his tenure as a contracts analyst with Bloomberg Government centered around two problems. The first, he said, was that investors depended on the companies themselves for information. Second, there was limited availability of independent sources.
“Companies tout the contracts they won but never talk about the ones they lost,” Friel said. “It’s very important to get information on a systematic basis across the services base and know what’s coming up with wins or losses.”
In one example, the Nation Analytics-Celero team can determine when a services competition moves to the full-and-open phase, Friel said.
“We’re focused on what’s happening in the market and how that impacts the competitive field,” Friel said. “We pull the information into our database and identifying when competitions are starting, recompetes and tying awards back to incumbent contracts. Sometimes that’s not in the data itself and we have to do that ourselves.”
What sets the Nation Analytics-Celero offering apart from the financial-focused investor research notes prominent in Wall Street circles is the partnership focuses on specific contract-related information, Friel said.
“We’re not engaging on their balance sheets but we look at it in context,” he said. “We’re pulling apart information that’s in databases and offering our own expertise on what that means.”
Nearly all of the major defense primes have set all-time highs since November on investor optimism of military spending increases under a Trump administration. Two closely-watched Wall Street benchmarks have also hit new records in that time: the S&P Aerospace & Defense index and the iShares U.S. Aerospace & Defense Exchange-Traded Fund.
Often, Friel sayid, the investment community “responds inappropriately to information” and GovCon stocks might show significant movement “based on a relative misunderstanding of information.”
Markets can be late to respond to large contract wins or losses that are not greatly publicized, he added, or stocks can move significantly on non-incremental contract wins that are in company press releases. In other instances, a company can tout its position on a large contract vehicle with multiple winners and that can send the stock higher.
This partnership’s goal is to offer a more strategic view of GovCon investment information and that is where Celero comes in.
“Their bread and butter is speaking at an executive level and put the data we’re compiling into that strategic level context,” Friel said.
Friel expects many of the service’s customers to be buy side investors and also to see interest from the contractors themselves and private equity firms. Contractors will want to see which of their competitors are bidding for contracts, he said.
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