13 Best Defense Stocks To Buy Now

Published on October 19, 2023 at 9:02 am by Sheryar Siddiq in Hedge Funds, News

In this article, we will discuss the 13 best defense stocks to buy now. If you want to explore similar stocks on this list, you can also take a look at 5 Best Defense Stocks To Buy Now.

The recent conflict between Israel and Hamas is reigniting worries about geopolitical risk for investors, who are already contending with the effects of increased interest rates, the Russia-Ukraine conflict, and emerging challenges in China’s economy. Last week, investors showed increased interest in exchange-traded funds that track defense companies in the United States and Europe, anticipating potential spillover effects from the Israel-Hamas conflict. The iShares U.S. Aerospace & Defense ETF, with a total value of $5 billion, witnessed net inflows of $7.2 million for the week ending Oct. 11. This marked a reversal from seven consecutive weeks of outflows. Similarly, the Invesco Aerospace & Defense ETF, valued at $2 billion, saw notable weekly net inflows of $48 million, marking its strongest performance since July 2022. Both funds experienced significant jumps of over 4% during the week, driven by robust performances of their top holdings Lockheed Martin Corporation (NYSE:LMT) and Northrop Grumman Corporation (NYSE:NOC), which surged 10% and 16%, respectively.

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The global aerospace and defense sector saw growth from $795.92 billion in 2022 to $855.62 billion in 2023, reflecting a compound annual growth rate (CAGR) of 7.5%. Projections suggest that the aerospace and defense market is set to further increase, reaching $1076.56 billion by 2027, signifying a CAGR of 5.9%. In addition, as revealed by Deloitte’s outlook survey, an impressive 88% of surveyed senior executives hold an optimistic view of the aerospace and defense industry for the upcoming year, ranging from somewhat positive to very positive. This optimism is attributed to various factors, including advancements in emerging technologies and sectors like advanced air mobility, evolving business models in fields such as space exploration, and the widespread adoption of digital thread and smart factory practices. In 2023, aerospace and defense enterprises that prioritize innovation and are ready to seize emerging opportunities are expected to surpass their peers, as per insights from Deloitte.

The ongoing conflicts in Ukraine and Gaza have significantly reduced arms stockpiles for both the U.S. and European nations. Consequently, defense contractors are poised to experience a consistent demand for the foreseeable future, fueled by the need to replenish missiles and other defense systems. To benefit from the growth potential in the defense industry, investors can look towards well-known market leaders, which include the likes of Lockheed Martin Corporation (NYSE:LMT), RTX Corporation (NYSE:RTX), and The Boeing Company (NYSE:BA).

Photo by Joel Rivera-Camacho on Unsplash

Our Methodology

We screened for companies operating in the defense sector and picked the 30 largest companies operating in the space. We then sourced the hedge fund sentiment for these companies from Insider Monkey’s proprietary database of over 900 elite money managers. We narrowed down our selection to stocks that were the most widely-held by hedge funds. We have ranked these stocks in ascending order of the number of hedge funds that have stakes in them.

13. Curtiss-Wright Corporation (NYSE:CW)

Number of Hedge Fund Holders: 27

Curtiss-Wright Corporation (NYSE:CW), based in Davidson, North Carolina, is a manufacturer and service provider with operations and facilities both within and outside the United States. The company specializes in defense solutions encompassing air, land, sea, space, cyberspace, as well as industrial applications.

On October 9. Curtiss-Wright Corporation (NYSE:CW) successfully obtained a five-year, $34 million firm-fixed-price indefinite delivery, indefinite quantity (IDIQ) contract with the Naval Surface Warfare Center (NSWC). The contract involves the supply of Modular Open Systems Approach (MOSA) based airborne data recorder technology, designated for utilization on both U.S. and Australian manned and unmanned maritime aircraft.

Curtiss-Wright Corporation (NYSE:CW) was held by 27 hedge funds at the end of Q2 2023. These funds held positions worth $294.6 million in the company, up from $243.8 million in the previous quarter when 23 hedge funds held stakes in the company. The hedge fund sentiment for the stock is positive. As of the quarter ending June, Robert Joseph Caruso’s Select Equity Group is the top shareholder in Curtiss-Wright Corporation (NYSE:CW) and has disclosed a stake worth $132.7 million.

In addition to Lockheed Martin Corporation (NYSE:LMT), RTX Corporation (NYSE:RTX), and The Boeing Company (NYSE:BA), Curtiss-Wright Corporation (NYSE:CW) is one of the best defense stocks to buy now.

12. Textron Inc. (NYSE:TXT)

Number of Hedge Fund Holders: 28

Textron Inc. (NYSE:TXT) is a diversified American industrial conglomerate headquartered in Providence, Rhode Island. The company’s subsidiaries encompass Arctic Cat, Bell Textron, Textron Aviation, and Lycoming Engines. It was established by Royal Little in 1923 under the name Special Yarns Company.

On August 7, the U.S. Navy awarded Textron Inc. (NYSE:TXT) a contract valued at around $241.37 million. The contract involves procuring materials and undertaking non-recurring activities associated with five Ship to Shore Connector Landing Craft Air Cushion 100 Class. The project is slated for completion by October 2025.

According to Insider Monkey’s second quarter database, 28 hedge funds were bullish on Textron Inc. (NYSE:TXT), compared to 25 funds in the preceding quarter. Cliff Asness’ AQR Capital Management is the largest stakeholder of the company, with 1.78 million shares worth $120.6 million.

11. Spirit AeroSystems Holdings, Inc. (NYSE:SPR)

Number of Hedge Fund Holders: 30

Spirit AeroSystems Holdings, Inc. (NYSE:SPR), headquartered in Wichita, Kansas, stands as one of the globe’s major producers of aerostructures for commercial aircraft, defense platforms, and business/regional jets. The company is engaged in the design, engineering, and production of fuselages, nacelles (including thrust reversers), struts/pylons, wing structures, and flight control surfaces.

On October 3, Spirit AeroSystems Holdings, Inc. (NYSE:SPR) revealed a strategic collaboration with Expleo in Tulsa, Oklahoma, and Infosys in Richardson, Texas, aimed at enhancing the company’s engineering capacities in both states. The partnership with Expleo is set to provide advanced digital engineering services for significant aerospace programs from a new site in Tulsa.

As of the second quarter of 2023, Spirit AeroSystems Holdings, Inc. (NYSE:SPR) shares were held by 30 hedge funds out of the 910 prominent hedge funds tracked by Insider Monkey, with a total value of $360.9 million.

10. L3Harris Technologies, Inc. (NASDAQ:LHX)

Number of Hedge Fund Holders: 35

L3Harris Technologies, Inc. (NASDAQ:LHX) is a prominent American technology firm, specializing in surveillance solutions, microwave weaponry, and electronic warfare. It was created through the merger of L3 Technologies (previously L-3 Communications) and Harris Corporation on June 29, 2019. Following this merger, it was anticipated to become the sixth-largest defense contractor in the United States.

On August 31, L3Harris Technologies, Inc. (NYSE:LHX) announced a quarterly dividend of $1.14 per share, consistent with previous payouts. The dividend was distributed on September 19 to shareholders of record as of September 5.

According to Insider Monkey’s second quarter database, 35 hedge funds were bullish on L3Harris Technologies, Inc. (NYSE:LHX), compared to 46 funds in the preceding quarter. Dmitry Balyasny’s Balyasny Asset Management is the leading position holder in the company, with 1.27 million shares worth $250.5 million.

9. Northrop Grumman Corporation (NYSE:NOC)

Number of Hedge Fund Holders: 40

Northrop Grumman Corporation (NYSE:NOC) is a major multinational company in the aerospace and defense technology sector. Employing 95,000 people and boasting an annual revenue exceeding $30 billion, it not only stands as one of the globe’s premier manufacturers of weaponry and providers of military technology, but also one of the best defense stocks to invest in.

The Korea Aerospace Industries awarded Northrop Grumman Corporation (NYSE:NOC) a contract on October 16 to deliver Airborne Laser Mine Detection System (ALMDS) solutions and technical assistance for the Engineering, Manufacturing, and Design (EMD) stage of the Korean Mine Countermeasures Helicopter (KMCH) program in the Republic of Korea. The EMD phase is projected to conclude in 2027.

According to Insider Monkey’s second quarter database, 40 hedge funds were bullish on Northrop Grumman Corporation (NYSE:NOC), compared to 45 funds in the prior quarter. Donald Yacktman’s Yacktman Asset Management is a prominent stakeholder of the company, with 409,839 shares worth $186.80 million.

Harding Loevner Global Equity Strategy made the following comment about Northrop Grumman Corporation (NYSE:NOC) in its Q1 2023 investor letter:

“Our other purchase was Northrop Grumman Corporation (NYSE:NOC), a US defense contractor whose stock price experienced a pullback. We like that Northrop has a larger presence than its rivals in the most favorable subcategories of the defense industry-namely, nuclear weapons, space systems, and what’s known as C4ISR (which stands for Command, Control, Communications, Computers. Intelligence, Surveillance, and Reconnaissance). C4ISR refers to digital systems that translate data picked up from different sensors-such as an incoming hypersonic missile or advancing troops-into a common format, and then escalate key information to the right people These differentiated technologies are especially relevant in a time of increased geopolitical tensions. Northrop also benefits from large barriers to entry in this stable industry, which should enable continued strong earnings and cash flow.”

8. General Dynamics Corporation (NYSE:GD)

Number of Hedge Fund Holders: 46

General Dynamics Corporation (NYSE:GD) is a worldwide enterprise focused on aerospace and defense, organized into four key segments: Aerospace, primarily engaged in business jet manufacturing and related services; Marine Systems, specializing in submarine and ship construction; Combat Systems, dedicated to armored vehicle and weapons production; and Technologies, providing IT and communication solutions.

A total of 46 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in General Dynamics Corporation (NYSE:GD). The biggest stakeholder of General Dynamics Corporation (NYSE:GD) during this period was James A. Star’s Longview Asset Management, which owns a $6.09 billion stake in the company.

7. KBR, Inc. (NYSE:KBR)

Number of Hedge Fund Holders: 47

KBR, Inc. (NYSE:KNR), formerly known as Kellogg Brown & Root, is a United States-based company that operates in the fields of science, technology, and engineering. KBR is actively involved in diverse markets, including aerospace, defense, industrial, and intelligence.

On October 17, KBR, Inc. (NYSE:KBR) secured a recompeted task order worth $75 million for a five-year duration. The task involves conducting research and analysis focused on critical technology domains for the U.S. Department of Defense (DoD). These domains encompass advanced materials, trusted artificial intelligence (AI) and autonomy, as well as renewable energy generation and storage.

47 out of the 910 hedge funds tracked by Insider Monkey were KBR, Inc. (NYSE:KBR)’s investors as of Q2 2023. is the biggest investor among these Benjamin Pass’ TOMS Capital through its $141 million investment.

6. Howmet Aerospace Inc. (NYSE:HWM)

Number of Hedge Fund Holders: 49

Howmet Aerospace Inc. (NYSE:HWM) is a global provider of advanced engineering solutions to the aerospace and transportation sectors. The company is divided into four segments: Engine Products, Fastening Systems, Engineered Structures, and Forged Wheels. The Engineered Structures segment specializes in delivering aerospace and defense applications, including titanium ingots, aluminum and nickel forgings, machined components, and assemblies.

On August 1, Howmet Aerospace Inc. (NYSE:HWM) released its Q2 results, reporting a non-GAAP EPS of $0.44 and revenue of $1.65 billion. These figures exceeded Wall Street estimates by $0.01 and $40 million, respectively. The company closed the second quarter with a cash balance of $536 million.

According to Insider Monkey’s second quarter database, 49 hedge funds were long Howmet Aerospace Inc. (NYSE:HWM), compared to 42 funds in the prior quarter. Paul Singer’s Elliott Management is the largest stakeholder of the company, with 17 million shares worth $847.2 million.

Oakmark Equity and Income Fund made the following comment about Howmet Aerospace Inc. (NYSE:HWM) in its Q1 2023 investor letter:

“During the quarter, we eliminated three positions: Howmet Aerospace Inc. (NYSE:HWM), Keurig Dr Pepper and LivaNova. Howmet performed well and reached our sell target. This is our second successful investment with CEO John Plant, whom we rank among the top CEOs.”

Howmet Aerospace Inc. (NYSE:HWM) joins the ranks of Lockheed Martin Corporation (NYSE:LMT), RTX Corporation (NYSE:RTX), and The Boeing Company (NYSE:BA) as one of the best defense stocks investors should keep note of.

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