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 Northrop Grumman Corporation (NYSE:NOC) 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).
An aeronautics engineer inspecting a model aircraft engine in a factory setting.
Northrop Grumman Corporation (NYSE:NOC)
Market Cap: $63.53 billion
Number of Hedge Fund Holders: 48
Northrop Grumman Corporation (NYSE:NOC) is one of the largest defense contractors in the world. It is the manufacturer of the B-21 Raider for the United States Air Force (USAF), which is intended to replace the aging B-1B Lancer and B-2 Spirit fleets.
On February 12, Northrop Grumman Corporation (NYSE:NOC) secured two contracts worth $1.4 billion to modernize the air and missile defense capabilities of the United States and Poland. Both contracts focus on the Integrated Battle Command System (IBCS) to help Washington and its allies stay ahead of emerging threats.
The company is also recognized as a leader in autonomous aerial systems. It has developed the MQ-4C Triton, which is one of the most advanced maritime ISR UAVs deployed today. On February 6, it was reported that Northrop Grumman Corporation (NYSE:NOC) had completed testing of the third MQ-4C Triton ordered by Australia, and was preparing to ferry the aircraft to Maryland for calibration testing before delivery later this year.
Northrop Grumman Corporation (NYSE:NOC) is also working on several critical contracts for the US Space Force. In December 2024, the defense contractor was awarded a contract extension for Phase 2 of its Next Gen OPIR Polar (NGP). The program is aimed at providing coverage of the North Pole to detect missile threats from adversaries.
On January 30, the company reported strong results for fiscal 2024. Sales climbed 4% year-over-year to reach $41 billion, driven by continued robust demand for NOC’s weapons. Net awards for the year totaled $50.6 billion, while it ended the year with a record backlog of $91.5 billion.
Wall Street analysts are bullish on Northrop Grumman Corporation (NYSE:NOC), with a consensus Buy rating and an average share price upside potential of over 25%, making it one of the best large cap stocks to buy.
Overall, NOC ranks 7th 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 timeframe. If you are looking for an AI stock that is more promising than NOC 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 Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
