Which stocks are at the forefront as DOGE uncertainty persists? The End of Gold?

📌 What Happened?

Government Securities stocks are once again in the spotlight of investors as they have historically performed relatively outperformed during periods of heightened macro uncertainties. Catalysts such as the DOGE's implications are not yet clear, President Trump's proposal for the 2026 budget, and Elon Musk's government advisory tenure coming to an end will determine expectations for the industry. According to Truist Securities analysts, these developments could play a critical role in determining the direction of investors in Q1 earnings season.

Truist notes that these catalysts will both reshape valuations and open up clearer investment opportunities. According to analysts' notes, the valuation multipliers of the sector are significantly narrowed. The EV/EBITDA multiplier distribution, which was 10 rounds in October 2024, is currently limited to only 4 rounds. This increases the importance of distinguishing factors in an environment where investors are more cautious in choosing stocks.

Past data show that the sector diverges relatively positively during times of crisis. In the 2008 global crisis, the group rose 8%, while the S&P 500 had fallen 53%. During the COVID period, the group was down 14%, while the overall market was down 18%. In the recent past, the SPX fell 13%, while group shares rose 1%. This chart once again highlights the defensive characteristics of Government Services shares.

Among the favorite stocks of analysts are KBR Inc. (KBR) and CACI International (CACI) are involved. KBR's forecasts include a cautious Fed assumption, while ICF International's (ICFI) extensive “kitchen sink” type projections that boost expectations are noteworthy. Truist, also known as Amentum Holdings (AMTM), Booz Allen Hamilton (BAH), Leidos Holdings (LDOS), Parsons Corp (PSN) and V2X Inc. It also revised downward its target prices for other key stocks in the sector, such as (VVX).

The retreat of CY26E EBITDA forecasts to 3% below consensus signals a cautious but cautious approach to the sector. Unless the DOGE uncertainty is resolved and the financial framework of the Trump administration becomes clear, these stocks are expected to take a relatively firmer stance. Despite the narrowing multipliers across the industry, defensive structures and public revenue streams provide investors with safe havens in volatile markets.

📉 Products That May Be Affected

🟢 Positive:
• KBR Inc. (KBR)
• CACI International (CACI)
• ICF International (ICFI)
• Parsons Corp. (PSN)
• Booz Allen Hamilton Holding (BAH)
• V2X Inc. (VVX)

🔴 Negative:
• Growth stocks with high volatility
• Non-defense sectors directly affected by uncertainty
• Non-public service firms experiencing contraction in EV/EBITDA multipliers

🧠 Expert Review

The Government Services sector stands out during periods when macro risks are intensifying, budget cuts are talked about and regulatory uncertainties are increasing. Although developments under DOGE are not yet clear, it can also create a window of opportunity for these stocks in the short term. Under the influence of catalysts, valuations can be expected to expand again and investors to re-position. The increased level of investability in the next six months of companies, especially those dependent on public projects, could support the allocation of more of these shares in portfolios. Traded from reasonable multipliers for long-term investors, cash-flow strong stocks can provide an advantage.

✅ Take Action

Shares focused on government-backed projects can gain a strong foothold in defensive strategies. Do not miss opportunities in the midst of uncertainty.
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🛑 Disclaimer

This content is not investment advice. You should make your decisions based on your own research and professional advisors.

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