Turn £10 a month into £11k with defence stock that could soar off the back of new Chancellor

NOW could be the perfect time to invest in defence stocks, as shares have started to soar in value. Markets are reacting to former defence secretary John Healey being appointed as Britain’s new Chancellor, and investors could potentially see big returns. Chancellor John Healey was previously defence secretary so is expected to increase defence spending Credit: Wiktor Szymanowicz/Future Publis Shares in defence companies have rocketed up in value following Mr Healey’s appointment Credit: Getty Experts say one stock in particular is worth watching now – and it could’ve made you £11,200 if you’d invested just £10 a month over the last decade. There is one defence company that investment analysts are currently rating as a “Strong Buy” – and that is German firm Rheinmetall. If a stock has Strong Buy status, that means experts believe it will significantly outperform the market or its specific sector. Essentially, it’s the highest endorsement investment analysts can give a stock and it means you could see big gains if you invest. Out of 20 analysts who have rated the stock, 17 rated it as Buy (meaning they recommend buying now), three rated it as Hold (which means keeping hold of it if you own it already), and none recommended selling. Rheinmetall is one of the largest military equipment manufacturers in Europe. It produces combat vehicles, weapons and ammunition, which it sells mostly to EU and NATO member states – including the UK. That means although it’s a German company, it’s likely to benefit from any increases to defence spending by the UK Government. Rheinmetall has already proven popular with investors after its share price shot up following Russia’s invasion of Ukraine in 2022. Investors saw massive returns of 127.97% in 2022, and 155% last year – well above the S&P 500’s average return of around 10%. That was because of bumper military spending commitments by the German government last year. Analysis by Finder found if you’d invested £10 a month over the past 10 years, you would now have £11,200. That includes £1,200 of your own money – so it’s a huge investment return of £10,000. Of course, there are some risks to consider before you invest in defence stocks. The industry has a reputation for project delays and cancellations, which can hit share prices. It’s worth keeping in mind that investing in individual companies is a risk because you could lose your money if the business doesn’t do well. So why could it still be a good time to buy now? Rheinmetall builds tanks and armoured vehicles for NATO countries and their allies Credit: Alamy Stock Photo For starters, defence companies are benefitting hugely from increased defence spending by European nations. NATO, which is a military alliance of countries from Europe and the US, has set a target of 5% of GDP for all members by 2035. The military alliance says this will be needed to make sure NATO countries are ready to fight if necessary. This is also to ensure each member is pulling its weight. Ruben Dalfovo, investment strategist at Saxo, said Rheinmetall “remains one of the clearest beneficiaries of Europe’s long-term effort to rebuild its defence capacity”. It’s recently seen higher sales and it’s already signed multibillion-pound contracts with governments. Loredana Muharremi, equity analyst at Morningstar, says her firm believes the market is underestimating Rheinmetall and its potential growth. “The market still largely views Rheinmetall as a traditional manufacturer of ammunition and armoured vehicles and worries that demand will peak or that drones will replace these products. We disagree,” she said. “Rheinmetall retains leading positions in ammunition, vehicles and short-range air defence, while partnerships with companies including Anduril, ICEYE and Lockheed Martin are accelerating its entry into autonomous systems, space-based surveillance and long-range missiles.” Plus, she says, some of its largest vehicle programmes will start converting into revenue after 2027 – so there is still potential for growth in the longer term. Why John Healey’s appointment could boost Rheinmetall stocks John Healey is a former defence secretary and has become the Chancellor under Andy Burnham Credit: Getty Another important factor is John Healey’s promotion to Chancellor. Defence shares jumped in value last Tuesday shortly after Mr Healey was given the role overseeing the UK economy. That’s because markets will now be expecting the Government to commit to more spending on defence. Mr Healey resigned as defence secretary in Sir Keir Starmer‘s government last month following a row over spending on the sector. He accused Mr Starmer and then-chancellor Rachel Reeves of putting the country’s security at risk by not investing enough. Now that Mr Healey is in place as Chancellor, it’s expected the Government will commit to further defence spending to meet NATO’s target. What are the risks I need to watch out for? BEFORE you start investing, you need to understand the risks. The return you make will depend on how much you invest and where you put your money. As we have seen recently, the stock market can dramatically fall. The US market last year saw its biggest drop since the start of the Covid pandemic after President Donald Trump announced plans to introduce punitive tariffs on goods imported from other countries. The UK’s own stock market, the FTSE 100, fell by more than 10 per cent after the news. You must be prepared for the value of your investment to fall as well as rise – so only invest money you can afford to lose. You need to be willing to invest cash for at least five years to mitigate any dips in the market and allow your money to recover. If you can’t afford to lock up your money for this long, investing may not be right for you. It’s usually better to drip-feed money into your investments instead of putting down a big chunk of money in one go. Before you start investing, experts say you should have a minimum of six months’ of wages in a savings account for emergencies. Experts say it could therefore be an ideal time to invest in defence companies, because if more defence spending is announced in the coming months, that could see share prices rocket up again. Although Rheinmetall is a German company, it could benefit from increased defence spending by the UK Government. The firm has a joint venture with British defence company BAE Systems which is producing the British Army’s Challenger 3 tanks and around half of its Boxer vehicles. It has a facility in Telford, Shropshire, where it has been recruiting and training new staff to boost its gun barrel production. In April, the British Government spent £1billion on 72 howitzers from the company. It also won another 15-year contract worth around £854million to provide training systems to the British Army. These are already factored in to Rheinmetall’s share price, but it’s a positive sign in terms of defence spending. Any downsides? Rheinmetall will release its first-half results next month which will likely impact its share price Credit: REUTERS Rheinmetall is set to share its first-half results on August 6, and investors will be looking for whether the company does better or worse than expected. This could cause the share price to rise or fall dramatically. Susannah Streeter, chief investment strategist at Wealth Club, said expectations for Rheinmetall have already risen sharply – which could lead to disappointment. “Much of the anticipated increase in defence spending is already reflected in the valuation, leaving less room for disappointment if contract awards slow, production bottlenecks emerge or government spending fails to keep pace with investors’ lofty expectations,” she said. Its share price has been volatile recently. Shares have dipped dramatically this year by almost half and are now trading at around £890 per share. That’s because the German government unexpectedly cancelled a multibillion-pound warship deal, spooking investors. George Sweeney, investing expert at Finder, said: “Although the share price remains elevated compared to pre-2025, it’s had a tough time lately, with the stock down by about 46% from its all-time-high reached in late 2025. “At one point, your investment would have been worth £20,200.” That means you would need to be prepared to stick out your investment for the long run, rather than panicking if the share price dips. You should aim to keep your money locked away in your investments for at least five years to ride out any bumps in the market and allow your money to build back up. Why you should invest in a fund rather than individual shares THE best way to decrease your risk while investing in defence stocks is to choose a fund rather than individual shares. Investment funds will spread your money out across multiple companies so you don’t have all your eggs in one basket. For example, the VanEck Defense ETF tracks a basket of stocks in this space, with a heavy weighting towards US names including RTX and Palantir. However it also includes shares in Rheinmetall. It has had an investment return of roughly 6% over the last year. Or you could go for the HANetf Future of Defence ETF, which gives you strong exposure to Rheinmetall and is up roughly 12% over the last year. This means you’ll get exposure to Rheinmetall but you’ll be more protected if its shares drop.