Goldman Sachs Defense Stocks: Top 5 Stock Picks

In this article, we discuss the top 5 Goldman Sachs defense stocks. If you want to read our detailed discussion on the defense sector, head over to Goldman Sachs Defense Stocks: Top 10 Stock Picks. 

5. General Dynamics Corporation (NYSE:GD)

Goldman Sachs’ Stake Value: $290,874,869

Number of Hedge Fund Holders: 46

General Dynamics Corporation (NYSE:GD) functions as a global aerospace and defense firm, conducting its operations across four main segments – Aerospace, Marine Systems, Combat Systems, and Technologies. It is one of the top Goldman Sachs defense stocks, with the firm holding a $290.8 million stake in the company.

On August 1, General Dynamics Corporation (NYSE:GD) declared a $1.32 per share quarterly dividend, in line with previous. The dividend is payable on November 10, to shareholders of record on October 6.

According to Insider Monkey’s second quarter database, 46 hedge funds were bullish on General Dynamics Corporation (NYSE:GD), compared to 43 funds in the last quarter. James A. Star’s Longview Asset Management is the leading position holder in the company, with 28.2 million shares worth just over $6 billion.

Here is what Oakmark Global Fund has to say about General Dynamics Corporation (NYSE:GD) in its Q1 2021 investor letter:

“The second new U.S. equity purchase was General Dynamics, a leading U.S. defense contractor and owner of the world’s premier business jet franchise (Gulfstream). We were able to purchase this high-quality and durable business at a meaningful discount to our estimate of its intrinsic value after a series of near-term concerns hurt its share price. Taking a longer term view, the company’s business jet franchise should benefit from a multi-year investment program in new, differentiated products. Also, its free cash flow conversion is set to improve materially and the company is poised to benefit from a highly visible ramp up in revenue related to next generation nuclear-powered submarines. As these positives come into clearer view, we expect sentiment to improve, along with the company’s share price.”

4. General Electric Company (NYSE:GE)

Goldman Sachs’ Stake Value: $443,959,690

Number of Hedge Fund Holders: 71

General Electric Company (NYSE:GE) operates as a high-tech industrial company worldwide. It offers gas and steam turbines, power generation solutions, and data-driven software for different sectors. Additionally, General Electric Company (NYSE:GE) designs and produces commercial and military aircraft engines, integrated engine components, electric power, and mechanical aircraft systems. It is one of the best Goldman Sachs defense stocks. In Q2 2023, Goldman Sachs held a $444 million stake in General Electric Company (NYSE:GE). 

On July 25, General Electric Company (NYSE:GE) reported a Q2 non-GAAP EPS of $0.68 and a revenue of $16.7 billion, outperforming Wall Street consensus by $0.22 and $1.55 billion, respectively. 

According to Insider Monkey’s second quarter database, 71 hedge funds were bullish on General Electric Company (NYSE:GE), up from 59 funds in the prior quarter. Chris Hohn’s TCI Fund Management is the leading stakeholder of the company, with 41.6 million shares worth $4.5 billion. 

Vulcan Value Partners made the following comment about General Electric Company (NYSE:GE) in its Q1 2023 investor letter:

“General Electric Company (NYSE:GE) was a material contributor during the quarter. With the successful spin-off of GE HealthCare in early January, the company operates in two major markets: GE Aerospace and GE Vernova. GE Aerospace powers three out of every four commercial flights. GE Vernova helps generate 30% of the world’s electricity and has a meaningful role to play in the energy transition. The company’s service activities, which are higher margin and more resilient, represent approximately 60% of revenue and 85% of its backlog. The company reported strong fourth quarter 2022 results and management’s 2023 outlook is positive.”

3. The Boeing Company (NYSE:BA)

Goldman Sachs’ Stake Value: $502,736,534

Number of Hedge Fund Holders: 57

The Boeing Company (NYSE:BA) designs, develops, manufactures, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems, and services worldwide. The Boeing Company (NYSE:BA) operates through four segments – Commercial Airplanes, Defense, Space & Security, Global Services, and Boeing Capital. Securities filings for Q2 2023 reveal that Goldman Sachs held 2.38 million shares of The Boeing Company (NYSE:BA) worth $502.7 million. 

On August 31, The Boeing Company (NYSE:BA) was awarded a $173.61 million contract as part of an existing agreement to repair landing gear for the F/A-18 E/F aircraft. The project is slated for completion by August 2026, with the Naval Supply Systems Command Weapon Systems Support in Pennsylvania overseeing the contracting activity.

According to Insider Monkey’s second quarter database, 57 hedge funds were bullish on The Boeing Company (NYSE:BA), compared to 52 funds in the preceding quarter. Phill Gross and Robert Atchinson’s Adage Capital Management is a prominent stakeholder of the company, with 2 million shares worth $438.6 million. 

Jackson Square Partners made the following comment about The Boeing Company (NYSE:BA) in its Q3 2022 investor letter:

“For The Boeing Company (NYSE:BA)–in short, we believe the worst of Boeing’s idiosyncratic issues are behind it, the airframe duopoly remains as protected as ever, and at current prices (where we’ve been adding), the stock is trading around ~6x FCF on 2025E. Current airframe production is running materially below expected travel demand over the next 5-10 years, creating a structural supply/demand imbalance that we believe will drive a decade of strong growth in civil aerospace from here. In our 2Q’22 correspondence, we described the attributes of our ideal growth ballast and said we hoped to convert another in the coming months – we believe Boeing checks all those boxes.”

2. RTX Corporation (NYSE:RTX)

Goldman Sachs’ Stake Value: $536,726,260

Number of Hedge Fund Holders: 56

RTX Corporation (NYSE:RTX), an aerospace and defense firm, offers systems and services to customers in the commercial, military, and government sectors worldwide. The company is divided into four segments – Collins Aerospace, Pratt & Whitney, Raytheon Intelligence & Space, and Raytheon Missiles & Defense. RTX Corporation (NYSE:RTX) is one of the top Goldman Sachs defense stocks. In the second quarter of 2023, Goldman Sachs held a position worth $536.7 million in RTX Corporation (NYSE:RTX). 

On July 25, RTX Corporation (NYSE:RTX) reported a Q2 non-GAAP EPS of $1.29 and a revenue of $18.32 billion, outperforming Wall Street estimates by $0.11 and $620 million, respectively. 

According to Insider Monkey’s second quarter database, 56 hedge funds were bullish on RTX Corporation (NYSE:RTX), compared to 48 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is the largest stakeholder of the company, with 2.8 million shares worth $276 million. 

Carillon Tower made the following comment about Raytheon Technologies Corporation (NYSE:RTX) in its Q3 2022 investor letter:

“Raytheon Technologies Corporation (NYSE:RTX) announced strong results led by strength in its commercial segment, but weakness in its defense business led to investor consternation. Management guided to a recovery in this segment, citing both transitory supply chain issues and continued strong demand.”

1. Lockheed Martin Corporation (NYSE:LMT)

Goldman Sachs’ Stake Value: $566,208,511

Number of Hedge Fund Holders: 52

Lockheed Martin Corporation (NYSE:LMT) is a company specializing in defense and aerospace, and is organized into four segments – Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space. It is the largest Goldman Sachs defense stock. Securities filings for Q2 2023 reveal that Goldman Sachs owned 1.2 million shares of Lockheed Martin Corporation (NYSE:LMT) worth $566.2 million. 

On July 18, Lockheed Martin Corporation (NYSE:LMT) reported a Q2 non-GAAP EPS of $6.73 and a revenue of $16.7 billion, outperforming Wall Street estimates by $0.28 and $810 million, respectively. 

According to Insider Monkey’s second quarter database, 52 hedge funds were long Lockheed Martin Corporation (NYSE:LMT), compared to 58 funds in the earlier quarter. John Overdeck and David Siegel’s Two Sigma Advisors is the largest stakeholder of the company, with 791,700 shares worth $364.4 million. 

Here is what Vltava Fund has to say about Lockheed Martin Corporation (NYSE:LMT) in its Q3 2022 investor letter:

“LMT is one of the world’s largest aerospace and defense companies. The war in Ukraine has reminded investors and the wider public just how important these companies are. The aerospace and defense industry in the USA is an established oligopoly. This means that a few large firms play a dominant role. While collectively they comprise an oligopoly, individually they often have monopoly positions in particular narrower segments. Their main counterparty is the US government, a key customer in what is known as a monopsonist position. This is a rather unusual situation, but one that is very advantageous for companies such as LMT.

LMT has a strong and long-term sustainable competitive advantage ensuing from the fact that its products are developed and manufactured at an extremely high level of technology and complexity, its development and contract cycles are measured in decades, and the costs for the government to switch to alternative suppliers are high. Moreover, part of the production is classified as secret, which further takes the wind out of the sails of potential competitors. This results in a very high return on capital and admittedly a slowly but steadily growing business.

In most NATO countries, which are LMT’s customers, defense outlays are based upon the size of GDP. This is currently growing very fast in nominal terms due to inflation in most countries. A number of countries have also announced significant increases in defense budgets, whether it be Germany, which aims to get to the NATO-agreed 2% of GDP, or Poland, which wants to spend more than twice as much on defense…” (Click here to see the full text)

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