In this article, we discuss the 5 defense stocks to buy as geopolitical tensions rise. If you want to read our detailed analysis of these stocks, go directly to the 10 Defense Stocks to Buy As Geopolitical Tensions Rise.
5. Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 42
Lockheed Martin Corporation (NYSE:LMT) is a security and aerospace firm. Elite hedge funds hold large stakes in the company. Among the hedge funds being tracked by Insider Monkey, New York-based firm Millennium Management is a leading shareholder in Lockheed Martin Corporation (NYSE:LMT) with 399,809 shares worth more than $142 million.
On February 28, Wolfe Research analyst Michael Maugeri upgraded Lockheed Martin Corporation (NYSE:LMT) stock to Outperform from Peer Perform with a price target of $467, noting that stronger international military spending in the wake of the Russian invasion of Ukraine would help lift defense stocks higher in the coming months.
At the end of the fourth quarter of 2021, 42 hedge funds in the database of Insider Monkey held stakes worth $976 million in Lockheed Martin Corporation (NYSE:LMT), compared to 51 in the previous quarter worth $1.2 billion.
In its Q4 2020 investor letter, RiverPark Advisors, LLC, an asset management firm, highlighted a few stocks and Lockheed Martin Corporation (NYSE:LMT) was one of them. Here is what the fund said:
“Despite better-than-expected third quarter results, LMT shares were weak for the quarter as defense spending is expected to be flat for the coming year. With a record $150 billion backlog and almost 30% of its revenue coming from building F-35 aircraft with deliveries forecast to reach 180 per year in 4-5 years (3Q’s revenue upside was from the F-35), we believe LMT should grow at a higher rate than overall defense budget growth and Street expectations over the next several years. Further, strategic acquisitions (LMT acquired AJRD for $4 billion in late December), debt pay down, a 3% dividend yield, and continued share buybacks from $6 billion per year of free cash flow should lead to even greater shareholder returns.”
4. Howmet Aerospace Inc. (NYSE:HWM)
Number of Hedge Fund Holders: 42
Howmet Aerospace Inc. (NYSE:HWM) provides advanced engineering solutions for the aerospace industry. In early December, Morgan Stanley analyst Kristine Liwag had initiated coverage of the stock with an Overweight rating and a price target of $40, noting that the firm was poised to benefit from the meaningful upside in earnings from higher aircraft production rates in the coming months.
Howmet Aerospace Inc. (NYSE:HWM) continues to be one of the top defense stocks on Wall Street. At the end of the fourth quarter of 2021, 42 hedge funds in the database of Insider Monkey held stakes worth $3.5 billion in Howmet Aerospace Inc. (NYSE:HWM), compared to 44 in the preceding quarter worth $3.4 billion.
In its Q4 2020 investor letter, FPA Crescent Fund, an asset management firm, highlighted a few stocks and Howmet Aerospace Inc. (NYSE:HWM) was one of them. Here is what the fund said:
“Howmet saw its stock price decline by around two-thirds from their Q1 2020 highs. Howmet’s price increased about three times from its low and ended the year at its all-time high. The value of its necessary and large market share business did not fluctuate as much as its stock price.”
3. General Dynamics Corporation (NYSE:GD)
Number of Hedge Fund Holders: 48
General Dynamics Corporation (NYSE:GD) is an aerospace and defense firm. Hedge funds have been piling into the stock in recent months. At the end of the fourth quarter of 2021, 48 hedge funds in the database of Insider Monkey held stakes worth $7.1 billion in General Dynamics Corporation (NYSE:GD), compared to 36 in the preceding quarter worth $6.7 billion.
On February 4, Morgan Stanley analyst Kristine Liwag upgraded General Dynamics Corporation (NYSE:GD) stock to Equal Weight from Underweight and raised the price target to $215 from $210, noting that improved aircraft deliveries in 2022 would ramp up the compound annual growth rate of the firm to near 18%.
2. Raytheon Technologies Corporation (NYSE:RTX)
Number of Hedge Fund Holders: 50
Raytheon Technologies Corporation (NYSE:RTX) operates as an aerospace and defense firm. On February 16, Wolfe Research analyst Michael Maugeri maintained an Outperform rating on the stock and raised the price target to $111 from $110, identifying the company as a top pick in the aerospace sector given the “underappreciated aftermarket opportunity and growing free cash flow” of the firm.
The hedge fund sentiment around Raytheon Technologies Corporation (NYSE:RTX) is also positive. At the end of the fourth quarter of 2021, 50 hedge funds in the database of Insider Monkey held stakes worth $2.3 billion in Raytheon Technologies Corporation (NYSE:RTX), compared to 48 in the preceding quarter worth $2.2 billion.
In its Q4 2020 investor letter, Davis Funds, an asset management firm, highlighted a few stocks and Raytheon Technologies Corporation (NYSE:RTX) was one of them. Here is what the fund said:
“In today’s uncertain economy, we believe we have found such businesses trading at bargain prices in two sectors: industrials and financials. In the industrial space, concerns about the impact of the economic downturn on short-term profitability led to a wave of selling in a select group of leaders with durable competitive advantages, long records of profitability and bright long-term prospects. Companies like Raytheon Technologies is a wonderful example of attractive investments in this sector.”
1. Honeywell International Inc. (NASDAQ:HON)
Number of Hedge Fund Holders: 51
Honeywell International Inc. (NASDAQ:HON) is a diversified technology and manufacturing firm. It is one of the favorite defense stocks in the hedge fund universe. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm DE Shaw is a leading shareholder in Honeywell International Inc. (NASDAQ:HON) with 1.6 million shares worth more than $342 million.
On March 4, Deutsche Bank analyst Nicole DeBlase raised the price target on Honeywell International Inc. (NASDAQ:HON) stock to $243 from $237 and kept a Buy rating on the shares, appreciating the 2022 buyback plan and improved long-term targets of the company.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Honeywell International Inc. (NASDAQ:HON) was one of them. Here is what the fund said:
“The portfolio’s quality bias and valuation discipline have generated compelling returns over time with typically strong relative results in more challenging environments as it did through the first three quarters of 2020. However, that same quality bias tends to create a more challenging relative performance environment for the Strategy during periods of sharp economic acceleration, which tend to benefit stocks that are more commodity linked or of lower quality. This has been the case during the vaccine- and stimulus-driven rally experienced late last year and during the most recent quarter. Sectors that lagged in the quarter included industrials, Honeywell also lagged in the quarter after previously generating strong returns over extended periods.”
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