This article looks at the 10 Best Defense Stocks to Buy in the S&P 500.
The NYSE Arca Defense Index has gained 17.73% year-to-date (YTD) as of the close of business on January 19, comfortably surpassing the S&P 500 Index’s returns of a mere 1.19% during the period.
Stocks in the sector have surged following President Trump’s statement earlier in the month calling for a substantial increase in the country’s military budget, amid the ongoing geopolitical tensions in different parts of the world.
The U.S. president, in a post on TruthSocial on January 7, said that the military budget for 2027 should be $1.5 trillion instead of $1 trillion, given the current security challenges. Trump believes the increased allocation will help in building a ‘dream military’ that will keep the U.S. well protected from threats.
Neil Wilson, UK investor strategist at Saxo Bank, told Reuters that geopolitics has shaped 2026 so far, with defense stocks and rare earth materials emerging as the major buying opportunities for investors.
Defense stocks outside of the U.S. have been rallying as well, particularly in Europe, following the American raid on Caracas to capture Venezuelan president Nicolás Maduro, and Trump’s plans for Greenland.
With that said, let’s now see some of the best defense stocks to buy in the S&P 500.
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Our Methodology
We used screeners to compile a list of defense stocks from the S&P 500 Index. From there, we shortlisted 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 Q3 2025. Finally, we ranked them in ascending order by the number of hedge funds holding positions in each. Where stocks were tied on hedge fund sentiment, we used market cap as the 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. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
10 Best Defense Stocks to Buy in the S&P 500
10. Textron Inc. (NYSE:TXT)
Number of Hedge Fund Holders: 36
Textron Inc. (NYSE:TXT) is among the 10 Best Defense Stocks to Buy in the S&P 500. On January 15, Susquehanna analyst Charles Minervino hiked the firm’s price target on the stock to $110 from $95, while reiterating a Positive rating.
According to TipRanks, the adjustment came as part of the firm’s broader preview of the aerospace and defense industry. In a research note to investors, Minervino noted encouraging fundamentals across defense, commercial aerospace, and the aftermarket and said Susquehanna was bullish on these sectors over the medium term.
Earlier in the day, Jefferies lifted its price target on the stock to $115 from $95 and kept a Buy rating. The revision comes ahead of the company’s Q4 2025 earnings call on January 28. The firm expects Textron Inc. (NYSE:TXT)’s 2026 EPS guidance to be between $6.30 and $6.50, which would fall within Jefferies’ estimates but below the consensus of $6.85.
On the same day, UBS also lifted its price target on TXT to $99 from $89 and maintained a Neutral rating on its shares. As of the close of business on January 19, the stock is a consensus Hold, with a one-year average share price target of $98.22, representing an upside of 4.23%.
Textron Inc. (NYSE:TXT) manufactures products for consumers across several industries, through its six business segments: Bell, Textron Aviation, Textron eAviation, Textron Systems, Industrial, and Finance.
9. Huntington Ingalls Industries, Inc. (NYSE:HII)
Number of Hedge Fund Holders: 39
Huntington Ingalls Industries, Inc. (NYSE:HII) is among the 10 Best Defense Stocks to Buy in the S&P 500. On January 13, Citigroup’s John Godyn lifted the firm’s price target on the stock to $450 from $376, while reiterating a Buy rating.
The update comes as part of the firm’s adjustments of price targets and estimates for stocks in the aerospace and defense industry. In a research note to investors, the analyst said that he expects the ongoing momentum to continue during the first half of the year.
As of the close of business on January 19, Huntington Ingalls Industries, Inc. (NYSE:HII) is a Moderate Buy, with a one-year average share price target of $368.33, representing a downside of 13.52%.
In other news, on January 13, the shipbuilder’s Mission Technologies division secured an indefinite-delivery/indefinite-quantity contract for the Missile Defense Agency’s SHIELD program. According to the company’s press release, the award has a ceiling value of $151 billion and covers a wide range of areas aimed at strengthening homeland defense.
Huntington Ingalls Industries, Inc. (NYSE:HII) is an American defense company with expertise in shipbuilding. It was recently listed among the Best Defense Dividend Stocks to Buy.
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