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 Lockheed Martin Corporation (NYSE:LMT) 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).
A military aircraft in flight, showing the strength of the company’s combat & air mobility capability.
Lockheed Martin Corporation (NYSE:LMT)
Market Cap: $99.61 billion
Number of Hedge Fund Holders: 58
Lockheed Martin Corporation (NYSE:LMT) is one of the largest defense contractors in the world. The company specializes in the research, design, and development of advanced technology systems, products, and services. It is among the best large cap stocks to buy.
Lockheed Martin Corporation (NYSE:LMT) is famed for producing some of the most notable military aircraft in history, including the F-35 fifth-generation fighter jet. The company also plays a vital role in delivering advanced autonomous solutions to the U.S. military and partners with the government to deliver breakthrough technologies aimed at further discovering space.
During its Q4 2024 earnings call on January 28, Lockheed Martin Corporation (NYSE:LMT) reported net sales of $18.6 billion for the quarter, down from $18.9 billion during the same period last year. It posted a net income of $527 million, representing a 71% year-over-year slide, driven by heavy losses associated with certain classified programs.
Lockheed Martin Corporation (NYSE:LMT)’s share price has fallen by 16% since the earnings call in which the company also shared a cautious profit outlook for fiscal 2025, amid a delay in the rollout of upgrades for the F-35. Moreover, while arms manufacturers were expected to get a boost under the Trump administration, the formation of DOGE has soured investor sentiment in defense stocks.
Despite a challenging environment, most Wall Street analysts remain bullish on Lockheed Martin Corporation (NYSE:LMT) with a consensus Buy rating and an average share price upside potential of 31% – the latter hinting at a recovery in the share price once the headwinds are over. The company remains a partner of choice for most American allies amid the worsening security situation in different parts of the world.
Overall, LMT ranks 3rd 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 LMT 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.
