Hi Sidney,
DroneShield (DRO) v Electro Optic Systems (EOS), two very volatile high value/growth defence stocks, that have been on rollercoaster rides through 2025. DRO is in a rapid growth phase with higher margins, but still scaling to consistent profitability whereas EOS is larger in revenue terms, but with more variable margins and historically more balance sheet risk.
- DroneShield has moved from pilot-deployments to commercial roll-out, with over 4,000 systems sold in over 40+ countries including and recent contracts with the U.S. Department of Defence. Its becoming more mainstream as counter-drone (C-UAS) technologies are increasingly seen as critical rather than experimental.
- EOS is a more established defence and space-systems company, with nearly 40 years of experience in remote weapon systems, optical tracking, and space domain awareness but it has slower growth because they do more traditonal defence work historically.
Hence emphasising this is a volatile space we prefer DRO at current levels.
Cash (AAA) – we are not in a position to advise what any one one particular investor should or should not do – we provide general as opposed to personal advice via the Market Matters reports. We do think the AAA is a safe investment for parking cash, particularly for investors holding cash on investment platforms that pay low returns (as they take a margin). However, while we regard the AAA ETF as extremely low risk given it invests in bank deposit accounts held with major Australian banks, the underlying risk is similar to holding cash at those banks, but it is not legally equivalent to a bank deposit and is not government-guaranteed.
James Hardie (JHX) fell on Thursday we think primarily because U.S. decking peer Trex (TREX US) delivered a downgrade and was subsequently flogged 30% — the worst single-day move for Trex since 2005. The downgrade confirmed what the market feared, James Hardie’s own acquisition of AZEK (a rival decking and cladding maker) was expensive and ill-timed. At the same time, it was reported that James Hardie has been deleted from the MSCI Australia Index, with the effective date given as 24 November 2025.
That was a surprise to all, given JHX themselves explicitly said it would “maintain its current CDI listing and index inclusion on the ASX”. The CDI was not cancelled, and the CDI structure itself was not the reason JHX was removed, though MSCI has not provided much detail from what we can see, so the exact criteria or threshold that JHX allegedly breached (e.g., liquidity, free float, nationality/sector classification, listing venue, corporate restructure) are not confirmed – we suspect MSCI have viewed this transaction as triggering a “nationality” or “listing venue” test, which forms part of their index inclusion considerations. For MSCI index tracking funds, that will prompt a sell down of stock, ~$900m from what we have read.
To be clear, JHX existing CDI structure will remain. For those note familiar, a CDI is a unit of beneficial ownership in an underlying share (or other security) of a foreign entity, where that entity’s actual shares are held by a nominee and the CDI trades on the ASX or is cleared via CHESS. Holders of CDIs typically get the economic benefits of ownership (dividends, rights, corporate actions) though legal title resides with a nominee. Because JHX is dominciled in the US, US withholding tax laws apply.
