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 TransDigm Group Incorporated (NYSE:TDG) 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 aerial shot of a modern commercial jetliner in flight, its wings glinting in the sunlight.
TransDigm Group Incorporated (NYSE:TDG)
Market Cap: $73.71 billion
Number of Hedge Fund Holders: 71
TransDigm Group Incorporated (NYSE:TDG) is an aerospace company that manufactures engineered aircraft components for commercial and military aircraft. Its share price has more than doubled over the last five years. The company was recently listed among the 15 Highest-Priced Stocks Right Now.
TransDigm Group Incorporated (NYSE:TDG) executed notable acquisitions in 2024, aimed at further solidifying its position in the aerospace and defense markets. These are also expected to add significant future revenue for the company. In June last year, it acquired Communications & Power Industries’ Electron Device business for $1.385 billion. Later, in July, it completed the $655 million acquisition of Raptor Scientific.
The company’s financial position remains robust. On February 4, TransDigm Group Incorporated (NYSE:TDG) declared results for the first quarter of fiscal 2025. It reported a net income of $493 million, up 29% year-over-year. This was driven by a 12% increase in net sales from last year. Adjusted EPS stood at $7.83, growing 9% from the prior year’s quarter.
Wall Street analysts are bullish on the stock, with a consensus Buy rating and an average share price upside potential of 12%. According to Insider Monkey’s database for Q3 2024, 71 hedge funds held a stake in the company. AltaRock Partners was the largest investor in TransDigm Group Incorporated (NYSE:TDG), with holdings valued at over $1.26 billion, as of December 31, 2024.
Overall, TDG ranks 2nd 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 TDG 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.
