Cohort PLC, a UK-based defence company, presents an intriguing opportunity for investors looking to diversify their portfolios before the year’s end. While many defence stocks have seen significant gains recently, Cohort’s share price remains below its January levels, suggesting it may be undervalued amidst rising defence spending.
Cohort’s Unique Business Model
Cohort operates as a collection of smaller companies that focus on specialised areas such as surveillance, threat detection, and cybersecurity rather than traditional defence manufacturing. This aligns well with the UK government’s focus on modernising its defence capabilities, as highlighted in the 2025 Strategic Defence Review. The review emphasises the importance of these sectors for future investment, positioning Cohort to potentially benefit from increased government spending.
Despite this promising outlook, Cohort’s latest financial results fell short of expectations. The company’s earnings before interest and taxes (EBIT) are projected to be less than last year’s robust figures. Nevertheless, Cohort maintains its full-year revenue guidance of £291 million and EBIT of £35 million. With a market capitalisation of £523 million, these figures make the stock appealing to investors.
Growth Through Acquisition
Cohort’s strategy involves acquiring smaller companies and providing them with the necessary support to grow. This decentralised model, while potentially risky due to the reliance on individual management teams, allows for greater efficiency and responsiveness to customer needs. Such agility can be critical in the fast-evolving defence sector, where adaptability is essential.
Cohort’s approach mirrors successful strategies employed by other UK firms, such as Halma and Diploma, both of which have excelled in the FTSE 100 over the past decade. The anticipated increase in defence spending could further enhance Cohort’s growth prospects. While not every acquisition leads to success, Cohort has shown a commendable track record, enabling it to seize opportunities that may be overlooked by larger private equity firms.
Cohort’s share price has declined since mid-2023, leading to a reassessment of its valuation. Previously considered expensive at around £18 per share, the current price of approximately £12 offers a different investment calculus. If the stock maintains its position at these levels through December, it could become a serious consideration for those investing in a Stocks and Shares ISA.
In summary, Cohort PLC stands out as a compelling investment opportunity in the UK defence sector. Its strategic focus on technology and decentralised operations, coupled with the potential for increased government funding, makes it a noteworthy contender for investors looking to engage in a growing industry. As the landscape of defence evolves, Cohort’s ability to adapt and thrive could deliver substantial long-term returns.
