We recently published a list of the 10 Best Military Drone Stocks to Buy Now. In this article, we will take a look at where Lockheed Martin Corporation (NYSE:LMT) stands against other best drone stocks.
Modern warfare is rapidly evolving from being the sole domain of soldiers, tanks, and fighters. Swarms of UAVs, guided by artificial intelligence, now fill the skies and can strike enemy targets with pinpoint accuracy. This revolution in warfare has blurred the lines between man and machine, resulting in a need for reassessment of military capabilities.
READ ALSO: 10 Countries with the Most Military Drones in the World and Goldman Sachs Defense Stocks: Top 12 Stock Picks.
The demand for drones has surged over the last few years, with countries actively using UAVs for intelligence, reconnaissance, surveillance, and target operations. These aerial vehicles offer a bird’s eye view of the battlefield, making it difficult for targets to move and hide from the conflict zone.
Drones were a prominent feature of the conflict in the Nagorno-Karabakh region between Azerbaijan and Armenia in 2020. They have been clouding the skies across several towns and cities during the Russia-Ukraine war, which defense experts see as the arrival of a new threat in the aerial defense space.
The US has been operating drones for about a century, having first deployed them during World War II and more recently during the wars in Afghanistan and Iraq. In 2023, the Department of Defense (DoD) announced Replicator, an initiative to build ‘attritable autonomous systems’ in mass over the next 18-24 months. Moreover, the Air Force is developing drone wingmen to fly alongside its fighter and bomber jets under the Collaborative Combat Aircraft (CCA) program. The first two CCA fighters were unveiled in March this year.
However, defense experts view the proliferation of UAVs as a security threat, with American troops increasingly coming under attack from non-state actors in the Middle East. Policymakers in Washington also worry about China getting a leaf out of the Kremlin’s book (Ukraine war) and launching similar strikes against US interests in the Pacific.
Much work is going into guarding countries against the threats posed by UAVs. In October 2024, the DoD awarded a $250 million contract to Anduril Industries to counter drone attacks against American forces. Under the contract, the US will receive 500 recoverable Roadrunner interceptors, which are reusable drones that can intercept incoming drones or land back on the ground if they are not engaged.
With that said, let’s head over to the list of the best drone stocks to buy.
A military aircraft in flight, showing the strength of the company’s combat & air mobility capability.
Methodology
We sampled stocks from ETFs with exposure to military drones and our previous articles on the subject. Both pure-play military drone makers and defense contractors with drone programs were included in our pool. From there, we selected the 10 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).
Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 65
Lockheed Martin Corporation (NYSE:LMT) specializes in the research, design, and development of advanced technology systems, products, and services. While the company is famed for producing some of the most notable military aircraft in history, including the F-35, it also delivers advanced autonomous solutions to the US military to meet the needs of its most demanding missions.
Some of the most prominent UAVs manufactured by Lockheed Martin Corporation (NYSE:LMT) include the RQ-170 Sentinel, Stalker, and Indago 4. The defense contractor continues to invest heavily in autonomy and AI. It has demonstrated its capabilities in crewed-uncrewed teaming, AI-driven autonomous systems, and integrated technologies at numerous recent US Army events.
The stock plunged nearly 25% over the last six months due to heavy losses in certain classified programs, a delay in the rollout of upgrades for the F-35, and losing out to Boeing on the F-47 program. However, the recent announcement of robust financial results for the first quarter of fiscal 2025 is likely to woo investors back into buying Lockheed Martin Corporation (NYSE:LMT).
The company reported sales of $18 billion for Q1, up 4% from last year, due to a surge in demand for weapons from ongoing conflicts in Ukraine and the Middle East. Net earnings were posted at $1.7 billion, with EPS of $7.28, beating estimates of $6.34 per share. Lockheed Martin Corporation (NYSE:LMT) generated a free cash flow of $955 million during the quarter and returned $1.5 billion to shareholders through dividends and share repurchases.
According to Insider Monkey’s database for Q4 2024, 65 hedge funds held a stake in Lockheed Martin Corporation (NYSE:LMT), improving from 58 at the end of the third quarter. It is one of the best drone stocks to buy now.
Overall, LMT ranks 4th among the 10 Best Military Drone Stocks to Buy Now. While we acknowledge the potential of drone 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. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. 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 this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
