We recently published a list of 10 Best Large Cap Defense Stocks to Buy Now. In this article, we are going to take a look at where Howmet Aerospace Inc. (NYSE:HWM) stands against other best large cap defense stocks to buy now.
The world has been rocked with conflict over the last few years, with the number of conflict zones worldwide increasing by nearly two-thirds since 2021. Ukraine, the Middle East, and parts of Africa have been the most intense theatres of war during this period.
READ ALSO: 8 Best Small Cap Defense Stocks to Buy Now and 8 Best Military Drone Stocks To Buy According to Analysts.
While the human impact of these conflicts has been tragic, the defense industry has profited by luring investors into piling up their stocks, with several of the world’s top contractors seeing their shares book all-time highs in 2024. An Aerospace & Defense ETF issued by iShares had returns of over 17% during the last calendar year. It is up 5.38% this year, as of February 14.
Defense sector experts see long-term growth potential under the Trump administration, as he is credited for leaving a mark on the U.S. military during his first stint, which saw the establishment of the United States Space Force (USSF) and defense spending reach record highs. During his election campaign, the 78-year-old repeatedly made mention of wanting to build a missile defense shield for the country, similar to the Iron Dome.
However, defense stocks fell sharply last week after Trump suggested the country could rapidly cut military spending in the future. He made these comments in the context of a potential future conference with China and Russia to discuss cutting defense expenditure to spend the money in other areas.
“When we straighten it all out, then one of the first meetings I want to have is with President Xi of China and President Putin of Russia, and I want to say let’s cut our military budget in half. And we can do that, and I think we’ll be able to do that.”
The U.S. president has shared mixed statements on defense spending throughout his campaign and the early days of his second stint. Trump has appointed Elon Musk to lead the Department of Government Efficiency (DOGE), which will work outside the federal stream and aims to improve governance by reducing wasteful spending, cutting unnecessary regulations, and restructuring federal agencies.
Trump has also vowed to end the tumultuous wars in Ukraine and the Middle East. Some analysts view his anti-war stance as detrimental to defense stocks. Russell Hackmann, president at Hackmann Wealth Partners, stated the following while talking to Quartz on November 4.
“Trump is more anti-war and therefore that is worse for the defense stocks.”
Methodology
We used stock screeners to identify companies in the aerospace and defense industry with a market cap between $10 billion and $200 billion as of the close of business on February 14, 2025. Then, we picked the top 10 stocks with the highest number of hedge fund stakes. We ranked them in ascending order of hedge fund holders in each company.
Data on hedge funds was sourced from Insider Monkey’s database of 900 hedge funds for the third quarter of 2024. In the case where two or more stocks were tied on the number of hedge fund holders, we outranked one over the other on market capitalization.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Engineers examining stress tests of an aircraft engine, working to make sure its ready for flight.
Howmet Aerospace Inc. (NYSE:HWM)
Market Cap: $54.2 billion
Number of Hedge Fund Holders: 45
Howmet Aerospace Inc. (NYSE:HWM) manufactures components for aircraft engines, fasteners, aluminum wheels for trucks, and titanium structures for aerospace and defense applications. It is one of the best large cap stocks to buy now.
During its Q4 2024 earnings call on February 13, Howmet Aerospace Inc. (NYSE:HWM) reported a revenue of $1.9 billion for the quarter. This was up 9% from last year, driven by growth in the commercial aerospace market. Net income was posted at $314 million, growing 33% from last year. Fourth-quarter adjusted EBITDA increased 27% year-over-year and was attributed to commercial and defense aerospace market growth.
Howmet Aerospace Inc. (NYSE:HWM) generated $977 million of free cash flow in fiscal 2024, which has helped maintain a strong balance sheet and supported attractive shareholder returns. The company deployed around $975 million in stock repurchases, debt reduction, and dividends during the year. On January 27, the Board approved a further 25% hike in dividends, reiterating HWM’s commitment to robust returns.
After strong results in 2024, Howmet Aerospace Inc. (NYSE:HWM) has raised its guidance for fiscal 2025 and now expects revenue growth to be around 8% year-over-year, coupled with improved profitability and cash generation. The encouraging outlook has been fueled by rising OEM production rates, strong demand for commercial aviation and engine spare parts, and continued growth in the defense aerospace aftermarkets.
Howmet Aerospace Inc. (NYSE:HWM) is one of the best large cap stocks to buy in the aerospace and defense sector, with Wall Street analysts having a consensus Buy rating for the stock. According to Insider Monkey’s database for Q3 2024, 45 hedge funds held a stake in the company, remaining unchanged from the second quarter.
Overall, HWM ranks 9th on our list of best large cap 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 HWM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
