Budget cuts in the US, by far the world's biggest buyer of military hardware, and across Europe threatened to plunge the defence industry into chaos. Withdrawal from Iraq and Afghanistan only compounded the problem and a subsequent slump in profits would surely spell doom for share prices, too. Well, it didn't. In fact, aerospace & defence has been one of the best performing sectors over the past two years, almost doubling since mid-2011. There are, however, further challenges, and while the boom in commercial aerospace has softened the blow, justifying current valuations is easier for some than others.