We recently compiled a list of the 11 Best American Defense Stocks to Buy Now. In this article, we are going to take a look at where HEICO Corporation (NYSE:HEI) stands against other best American defense stocks.
America’s defense sector has struggled under Trump’s second term as president, amid mixed views on military expenditure in the early days of his second stint. Shares were volatile last month following his statement to cut defense spending in the future, and later in response to a contentious spat with visiting Ukrainian leader, Volodymyr Zelensky, at the Oval Office.
The creation of DOGE is also reshaping investors’ views of the industry. Byron Callan, managing partner at Capital Alpha Partners, believes there is a high level of uncertainty in the US defense sector related to current and future programs and the likelihood of severe cuts to government workforces.
READ ALSO: 13 Best Defense Stocks to Buy According to Billionaires and 10 Best Large Cap Defense Stocks to Buy Now.
On the other hand, Trump’s pivot on Ukraine has fueled robust gains in defense stocks elsewhere, especially in Europe, where several armament manufacturers have seen double-digit growth this year, with some even reaching record highs, as governments faced pressures to increase military expenditure.
Washington has repeatedly called for Europe to spend more on defense, while stressing that the US could no longer foot the bill. EU leaders met in Brussels last week to discuss the ‘ReArm Europe Plan’, which will allow the bloc to mobilize funds up to $860 million through bonds and relaxed rules on borrowing and spending.
According to a report in Reuters, asset managers across Europe are planning to increase exposure to defense stocks, under pressure from investors and politicians to loosen restrictions. Funds that have been badged as ‘sustainable’ under the EU’s rules are required to ensure their investments do no significant harm, because of which they tend to avoid the sector completely.
Several Korean companies have also benefited from Europe’s defense splurge. While the performance of the US defense sector was lagging behind Europe and Asia well before the presidential elections, the gap has widened after Trump’s victory.
Despite a grim outlook, Citi analyst, Jason Gursky, is urging investors that this is the right time to buy American defense stocks. Here is what he wrote in a note to clients last week:
“We recognize the world order is evolving under the current President, perhaps to a multi-polar one in which three countries control spheres of influence over the Americas, Europe and Asia. However, we don’t view that world to be any less dangerous or one that decreases the need to acquire the tools of deterrence.”
Trump’s recent statement on resurrecting American military and commercial shipbuilding has also been well-received. Shares of a major naval defense contractor have surged over the past week, following the announcement. The US president has vowed to fix the industry, which he sees as vital to national security, given the strategic competition with China.
A fighter jet in formation, revealing the prowess of the companies defense arm.
Our Methodology
For this article, we sifted through screeners to identify American stocks in the aerospace and defense industry. From there, we selected the 11 stocks with the highest number of hedge fund investors, based on Insider Monkey’s database of over 1,000 prominent hedge funds as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
HEICO Corporation (NYSE:HEI)
Number of Hedge Fund Holders: 67
HEICO Corporation (NYSE:HEI) is an aerospace and technology company that manufactures jet engines and aircraft parts. It also supports the government through activities such as reverse engineering, manufacturing aircraft engines and parts, and repair and maintenance services.
On March 5, Truist Securities raised HEICO Corporation (NYSE:HEI)’s price target to $294 per share from $282 previously, while maintaining the Buy rating. The adjustment followed the company’s strong results for the first quarter of fiscal 2025, in which it reported an all-time record quarterly net income of $168 million, up 46% year-over-year. Net sales were also up 15% from last year, while EBITDA registered a 22% increase compared to the same period in 2024.
HEICO Corporation (NYSE:HEI)’s robust performance during the quarter was driven by double-digit organic growth within both business segments. The Flight Support Group experienced increased demand across product lines, while the Electronic Technologies Group saw a surge in demand for its defense, space and aerospace products.
HEICO Corporation (NYSE:HEI)’s shares are up by nearly 16% over the past month. Wall Street analysts have a consensus Buy rating for the stock and anticipate a further 6% uptick, on average, in its share price. According to Insider Monkey’s database for Q4 2024, 67 hedge funds held a stake in the company, improving from 57 at the end of the third quarter. It is one of the best defense stocks to buy now.
Overall, HEI ranks 5th among the 11 Best American Defense Stocks to Buy Now. While we acknowledge the potential of defense companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than HEI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires
Disclosure: None. This article is originally published at Insider Monkey.
