This article looks at the 10 Best Aerospace and Defense Stocks to Buy According to Hedge Funds.
The iShares U.S. Aerospace & Defense ETF (ITA) has returned 3.35% year-to-date as of the close on June 5, compared with the S&P 500 Index, which has gained 7.66% during the period. The sector has been hit with volatility due to a mix of geopolitical uncertainty and profit-taking.
In a note dated June 2, Bernstein analyst Douglas Harned noted the slump in shares of major defense contractors since the beginning of the Iran war, but added that the decline was more due to investors shifting toward other sectors offering faster revenue growth than to weak industry fundamentals in the defense sector.
Harned said that the valuations of most major defense stocks were near record highs at the onset of the conflict, leaving the sector exposed. While the analyst believes the decline has been steeper than anticipated, he does not see a major recovery until at least November’s midterm elections.
Despite that, defense tech IPOs have surged in 2026 with issuers looking to pounce on the tailwinds from the Middle East crisis. In the latest streak of new listings, Applied Aerospace & Defense, Inc. reached a valuation of $3.54 billion following its debut on the New York Stock Exchange on June 3.
Trip Ferguson, the company’s CEO, was quoted as saying the following by Reuters:
“We’re seeing generational demand across space and defense. The world is very unstable. We see a very strong demand signal to provide highly engineered systems, both for replenishment, but also for next-gen technology.”
On the aerospace side, China’s deal to buy 200 Boeing jets during President Trump’s recent visit to Beijing has raised optimism regarding the reopening of sales in the country and more future orders from the world’s second-largest economy.
With that said, let’s now head over and see the best aerospace and defense stocks to buy according to hedge funds.
Methodology
We used screeners to identify aerospace and defense stocks that trade on American exchanges. From there, we selected the top 10 companies that had the highest number of hedge fund investors having a stake in them, based on Insider Monkey’s database of prominent hedge funds as of Q1 2026. Finally, we ranked them in ascending order based on the number of hedge funds holding positions. When two or more stocks were tied in hedge fund sentiment, we used market cap as a tiebreaker.
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. Insider Monkey’s quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 599.2% since May 2014, beating its benchmark by 372 percentage points (see more details here).
10 Best Aerospace and Defense Stocks to Buy According to Hedge Funds:
10. Northrop Grumman Corporation (NYSE:NOC)
Number of Hedge Fund Holders: 62
Northrop Grumman Corporation (NYSE:NOC) is among the 10 Best Aerospace and Defense Stocks to Buy According to Hedge Funds. On June 1, the defense contractor said it had completed a key flight test of its next-generation precision-strike missile, Jackal.
According to the company’s press release, the assessment results confirmed the readiness of Jackal’s flight systems, with the missile demonstrating its autonomous, navigational, and propulsion capabilities.
Key capabilities include speeds of over 300 miles per hour, and a range of up to 100 kilometers when launched from the surface or 125 kilometers in the case of air launch. Moreover, Jackal’s AI-backed algorithm allows it to detect and tackle threats without a direct line of sight.
This marks another milestone for Northrop Grumman Corporation (NYSE:NOC) in its efforts to deliver reliable weapons for the modern battlefield. Additional testing is planned for Jackal as it moves towards operational readiness.
In other news, on May 19, the company declared a quarterly dividend of $2.47 per share for all shareholders on record as of the close on June 1. The payment is scheduled for June 17.
Northrop Grumman Corporation (NYSE:NOC) is one of the largest defense contractors in the world. It is engaged in the design, development, integration, and maintenance of advanced systems across aeronautics, space, defense electronics, and mission solutions.
9. General Dynamics Corporation (NYSE:GD)
Number of Hedge Fund Holders: 62
General Dynamics Corporation (NYSE:GD) is among the 10 Best Aerospace and Defense Stocks to Buy According to Hedge Funds, with 62 hedge funds holding a stake in the company, according to Insider Monkey’s database for Q1 2026.
Wall Street has a Moderate Buy rating on the stock, based on the recommendations from 15 analysts, with an average share price upside potential of 12%, as of the close on June 5.
The company reported strong results for the first quarter of fiscal 2026, with revenue and earnings both comfortably surpassing Wall Street’s expectations, as ongoing geopolitical conflicts drove higher sales across segments. Orders totaled $26.6 billion during the quarter, taking the backlog to $130.8 billion.
General Dynamics Corporation (NYSE:GD) lifted its full-year 2026 annual profit forecast in the range of $16.45 and $16.55 per share, up from its initial guidance of $16.10 to $16.20 per share.
In other news, press reports last week suggested the defense contractor is planning to unwind its ties with the Turkish firm Repkon and invest $200 million to begin production of 155mm artillery shells at its Mesquite, Texas, plant, which has been impacted by delays.
General Dynamics Corporation (NYSE:GD) is a leading global aerospace and defense company, operating through its Aerospace, Marine Systems, Combat Systems, and Technologies segments.
8. HEICO Corporation (NYSE:HEI)
Number of Hedge Fund Holders: 74
HEICO Corporation (NYSE:HEI) is among the 10 Best Aerospace and Defense Stocks to Buy According to Hedge Funds. On June 1, Citigroup analyst John Godyn hiked the firm’s price target on the stock to $403 from $323 and maintained a Buy rating.
The firm described Heico as a ‘reliable compounder’ and said it had raised estimates for the company following its second-quarter earnings beat.
On the same day, UBS also lifted its price target on HEICO Corporation (NYSE:HEI)’s shares to $390 from $371, while keeping a Neutral rating.
According to TipRanks, the firm noted the robust performance in Q2 and added that EBITDA estimates were rising amid strong demand in the commercial aerospace and defense markets. In a research note to investors, UBS said that it was not seeing a slowdown in the aftermarket despite the Iran war and high energy prices.
As of the close of business on June 5, the stock is a Moderate Buy with an average share price upside potential of 18%.
The company reported a record net income of $233.8 million in the quarter, up 49% year-over-year. Earnings per diluted share came in at $1.66. Net sales also grew 25% from the prior year to a record $1,375.7 million.
HEICO Corporation (NYSE:HEI) is a leading manufacturer of jet engines and aircraft component replacement parts.
7. Howmet Aerospace Inc. (NYSE:HWM)
Number of Hedge Fund Holders: 75
Howmet Aerospace Inc. (NYSE:HWM) is among the 10 Best Aerospace and Defense Stocks to Buy According to Hedge Funds, with 75 hedge funds holding a stake in the company as of Q1 2026, up from 71 in the prior quarter.
Wall Street has a bullish outlook on the stock, with a Strong Buy rating based on recommendations from 14 analysts and an average share price upside potential of 19% as of the close on June 5.
Recent updates include Bank of America’s Ronald Epstein, who on May 26 reiterated a Buy rating on the company’s shares, according to a report on TipRanks.
Earlier on May 18, Citi analyst John Godyn hiked the price target on Howmet Aerospace Inc. (NYSE:HWM) to $303 from $271 and maintained a Buy rating. The adjustment came after the firm updated models in the aerospace and defense sector.
The analyst said he does not anticipate an ‘immediate V-shaped rally’ until hostilities in the Middle East cease, but added that the recent sell-offs present investors with a buying opportunity. Godyn expects aerospace stocks to gain first, with defense companies following.
In other news, the aircraft parts maker has made a strong start to 2026, with first-quarter revenue, adjusted EBITDA, adjusted EBITDA margin, and adjusted EPS surpassing the high end of the guidance.
The company also comfortably beat Wall Street’s revenue and profit expectations and lifted its full-year guidance on the back of robust growth in its aerospace and gas turbine businesses.
Howmet Aerospace Inc. (NYSE:HWM) provides advanced engineered solutions for the aerospace and transportation industries. The company’s primary business focus is on providing components for aircraft engines, airframe structures, and fastening systems.
6. Woodward, Inc. (NASDAQ:WWD)
Number of Hedge Fund Holders: 76
Woodward, Inc. (NASDAQ:WWD) is among the 10 Best Aerospace and Defense Stocks to Buy According to Hedge Funds. Institutional investors’ interest in the stock continues to grow, with 76 hedge funds holding a stake in the company as of Q1 2026, up from 69 in the previous quarter.
Wall Street has a Strong Buy rating on its shares with an average share price upside potential of 22%, as of the close on June 5.
Recent updates include Susquehanna, which on May 26 initiated coverage on Woodward, Inc. (NASDAQ:WWD) with a Positive rating and a price target of $423. The firm’s analyst Charles Minervino told investors in a research note that the company is expected to expand its revenue by 12% and free cash flow by 24% per annum through 2028.
According to TipRanks, Susquehanna noted the company’s ‘strong exposure’ to Airbus and Boeing, while adding that its robust commercial aerospace backlog, utilization improvement, and a shift from hydraulic systems to electrification were likely to drive growth.
In other news, on April 29, the company reported a 23% increase in second-quarter net sales to $1.1 billion. Earnings per share came in at $2.19, up 23% year-over-year, and surpassing Wall Street’s expectations. Following the upbeat results, the management lifted its sales and profit guidance for the full year.
Woodward, Inc. (NASDAQ:WWD) designs, produces, and services energy conversion and control solutions for the aerospace and industrial equipment markets.
While we acknowledge the potential of WWD to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than WWD and that has 100x upside potential, check out our report about the cheapest AI stock.
Click to continue reading and see the 5 Best Aerospace and Defense Stocks to Buy According to Hedge Funds.
Disclosure: None. Follow Insider Monkey on Google News.
