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.
8. General Dynamics Corporation (NYSE:GD)
Number of Hedge Fund Holders: 58
General Dynamics Corporation (NYSE:GD) is among the 10 Best Defense Stocks to Buy in the S&P 500. On January 15, Susquehanna hiked its price target on the stock to $420 from $405 and maintained a Positive rating, as part of the firm’s broader analysis of the industry.
On the same day, UBS reiterated a Neutral rating on the stock and raised its price target to $388 from $381. As of the close on January 19, the aerospace and defense company is a Moderate Buy based on the ratings of 15 analysts. The stock has a one-year average share price target of $390.62, representing an upside of 6.33%.
In other news, on January 12, General Dynamics Corporation (NYSE:GD) announced that its business unit General Dynamics Information Technology (GDIT) had secured a $988 million contract to modernize the U.S. Navy’s C5ISR systems.
As part of the agreement, GDIT will modernize and integrate these systems across all surface combatant ships through services such as engineering, logistics, procurement, and installation, thereby enhancing the operational effectiveness of naval assets.
General Dynamics Corporation (NYSE:GD) is a leading global aerospace and defense company, operating through its Aerospace, Marine Systems, Combat Systems, and Technologies segments.
7. L3Harris Technologies, Inc. (NYSE:LHX)
Number of Hedge Fund Holders: 59
L3Harris Technologies, Inc. (NYSE:LHX) is among the 10 Best Defense Stocks to Buy in the S&P 500. On January 15, UBS lifted its price target on the stock to $349 from $323, while keeping a Neutral rating.
The adjustment follows RBC Capital’s update a day earlier when the firm hiked its price target to $360 from $315 and reiterated a Sector Perform rating on the stock. The analyst noted the company’s recent partnership with the Department of War (DoW), which will see a $1 billion convertible preferred security investment in its rocket motor business.
RBC said the move was in line with the DoW’s ‘Arsenal of Freedom’. The partnership will ensure a stable supply of motors needed in missile programs and marks one in a series of investments made by the U.S. government in corporate companies under President Trump’s second term.
L3Harris Technologies, Inc. (NYSE:LHX) is planning to have the IPO for its Missile Solutions business during the latter half of 2026, after which the $1 billion security will convert to common equity upon becoming a new public company.
In other news, on January 14, the company said it was selected by the U.S. Navy and Marines under a multi-year contract to deliver 34 T7 Robots to strengthen explosive ordnance disposal capabilities. According to the press release, deliveries are scheduled to begin this year.
Wall Street has a bullish outlook on the stock with a consensus Strong Buy rating and a one-year average share price target of $361, representing an upside potential of 4.20% as of the close on January 19.
L3Harris Technologies, Inc. (NYSE:LHX) provides end-to-end technology solutions connecting the air, land, space, sea, and cyber domains in national security.
6. Northrop Grumman Corporation (NYSE:NOC)
Number of Hedge Fund Holders: 59
Northrop Grumman Corporation (NYSE:NOC) is among the 10 Best Defense Stocks to Buy in the S&P 500. On January 15, UBS analyst Gavin Parsons lifted the firm’s price target on the stock to $777 from $770, while keeping a Buy rating.
The update follows Citigroup’s adjustment on the stock on January 13, when the firm hiked its price target on the company’s shares to $715 from $654 and reiterated a Buy rating, as it revised its position on stocks in the aerospace and defense sector, citing strong momentum.
Based on the ratings of 13 analysts, Northrop Grumman Corporation (NYSE:NOC) is a Moderate Buy. The stock has a one-year average share price target of $692.08, representing an upside of 3.78% as of the close on January 19.
On January 12, the company was awarded a $233 million contract to manufacture a new advanced lightweight torpedo for the U.S. Navy, which will feature improved lethality. The agreement will also include manufacturing proof and delivery for the qualification phases.
This follows a $94.3 million contract secured from the Navy on January 7 to build a new second-stage solid rocket motor for missile programs to guard against aerial, surface, and hypersonic threats.
Northrop Grumman Corporation (NYSE:NOC) is one of the world’s largest defense contractors. It is engaged in the design, development, integration, and maintenance of advanced systems across aeronautics, space, defense electronics, and mission solutions.
5. TransDigm Group Incorporated (NYSE:TDG)
Number of Hedge Fund Holders: 68
TransDigm Group Incorporated (NYSE:TDG) is among the 10 Best Defense Stocks to Buy in the S&P 500. On January 16, the company announced it had reached an agreement with Vance Street Capital to acquire Jet Parts Engineering and Victor Sierra Aviation Holdings for approximately $2.2 billion.
The takeover will include certain tax benefits. It is set to further expand the company’s position in the aerospace aftermarket, following December’s $960 million acquisition of Stellant Systems, Inc. from Arlington Capital Partners.
Aftermarket businesses have become one of the most lucrative areas of the sector, given the rising demand for aircraft parts and maintenance as airlines look to extend the life of their fleets.
Both Jet Parts Engineering and Victor Sierra Aviation had a combined revenue of $280 million in 2025, according to a press release by TransDigm Group Incorporated (NYSE:TDG).
In other news, UBS on January 15 lifted its price target on the stock to $1,804 from $1,798, while reiterating the firm’s Buy rating. Based on the ratings of 13 analysts, TDG is a consensus Strong Buy, with a one-year average share price of $1,604.25, representing an upside of 10.64% as of Monday’s close.
TransDigm Group Incorporated (NYSE:TDG) manufactures engineered aircraft components for commercial and military aircraft.
4. Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 68
Lockheed Martin Corporation (NYSE:LMT) is among the 10 Best Defense Stocks to Buy in the S&P 500. On January 15, UBS lifted its price target on the stock to $580 from $513, while keeping a Neutral rating.
This follows Jefferies’ update on the stock on January 12, when the firm raised its price target to $540 from $500, while maintaining a Hold rating. The analyst noted that despite share price appreciation drivers, the stock underperformed last year due to investor concerns over margin risk.
Jefferies further added that it anticipates Lockheed Martin Corporation (NYSE:LMT)’s fourth-quarter top-line figure to largely fall in line with expectations, while adding that the guidance for revenue and EPS in 2026 could disappoint investors.
The stock is a consensus Hold with a one-year average share price target of $559.23, representing a downside of about 4% as of the close on January 19.
In other news, on January 6, the defense contractor announced it had reached a seven-year agreement with the Department of War (DoW) to enhance the annual output capacity of its PAC-3 Missile Segment Enhancement (MSE) interceptors to 2,000 units from approximately 600.
The company’s press release said an initial contract with the U.S. government was anticipated upon the final FY26 Congressional appropriations.
Lockheed Martin Corporation (NYSE:LMT) is one of the world’s largest defense contractors. It specializes in the research, design, and development of advanced technology systems, products, and services.
3. RTX Corporation (NYSE:RTX)
Number of Hedge Fund Holders: 76
RTX Corporation (NYSE:RTX) is among the 10 Best Defense Stocks to Buy in the S&P 500. On January 14, RTX Corporation (NYSE:RTX) announced that its small satellite manufacturing subsidiary, Blue Canyon Technologies, had launched a satellite to support NASA’s Pandora mission.
The Saturn-200 minisatellite will conduct studies on exoplanets’ atmospheres and when they transit, especially when passing by their host stars. This is the 87th spacecraft deployed by Blue Canyon to-date.
In other news, RTX Corporation (NYSE:RTX) and Spain’s Indra Sistemas were chosen by the U.S. government earlier this month to provide new radars, as part of a $12.5 billion Congressional plan to overhaul the country’s aging air traffic control system.
Based on the ratings of 14 analysts, the stock is a Moderate Buy with a one-year average share price target of $198.92, representing a downside of 1.49% as of January 19.
Recent analyst updates include Susquehanna analyst Charles Minervino, on January 15, raising the firm’s price target on the stock to $230 from $205, while maintaining a Positive rating. This followed Citigroup’s adjustment earlier in the week on January 13, when it hiked the price target to $227 from $211 and kept a Buy rating.
RTX Corporation (NYSE:RTX) is a giant in the global aerospace and defense industry, providing systems and services to commercial, military, and government clients. It operates through three main businesses: Collins Aerospace, Pratt & Whitney, and Raytheon.
2. GE Aerospace (NYSE:GE)
Number of Hedge Fund Holders: 102
GE Aerospace (NYSE:GE) is among the 10 Best Defense Stocks to Buy in the S&P 500. The company is an important player in the defense sector. Last week, in an initiative with Lockheed Martin, the company announced the completion of a series of tests showing the effectiveness of a liquid-fueled rotating detonation ramjet in hypersonic missiles.
This marked the first such collaboration between the companies under a joint technology development arrangement. The successful demonstration is set to make missiles fly faster and travel longer distances, while reducing costs in contrast to other ramjet alternatives.
Earlier on January 8, GE Aerospace (NYSE:GE) said it had secured a $1.4 billion multi-year contract from the Naval Air Systems Command (NAVAIR) to provide additional T408 engines for the Marine Corps’ CH-53K.
The Lots 9-13 contract builds on the six previous agreements for the T408 Turboshaft engines, which included a 2023 contract worth $684 million. The latest deal will see GE Aerospace (NYSE:GE) provide new production and spare engines, along with sustainment support.
In other news, GE Aerospace (NYSE:GE) continues to be on analysts’ radar. Recent updates include UBS, on January 15, lifting its price target on the stock to $368 from $366, with a Buy rating. Earlier, on January 13, Citigroup also reiterated its Buy rating. However, the firm cut its price target on the shares to $378 from $386.
Based on the ratings of 9 analysts, the stock is a Strong Buy. It has a one-year average share price target of $348.33, representing an upside potential of 7.14% as of the close on January 19.
GE Aerospace (NYSE:GE) is a global aerospace propulsion, services, and systems company with an installed base of around 25,000 military and 45,000 commercial aircraft engines.
1. The Boeing Company (NYSE:BA)
Number of Hedge Fund Holders: 106
The Boeing Company (NYSE:BA) is among the 10 Best Defense Stocks to Buy in the S&P 500. According to TipRanks, Jefferies analyst Sheila Kahyaoglu reiterated the firm’s Buy rating on the stock on January 19, with a price target of $290.
This follows Bernstein’s adjustment to the stock last week, on January 15, when analyst Douglas Harned reiterated an Outperform rating and raised the price target to $298 from $277. The firm anticipates growth ahead for the company and identified Boeing as its top pick in the aerospace and defense sector for 2026.
Based on the ratings of 17 analysts, the stock is a consensus Strong Buy. The Boeing Company (NYSE:BA) has a one-year average share price target of $257.69, representing an upside of 4.04% from Monday’s close.
The aerospace company released delivery figures for 2025 on January 13. During the year, it handed over 127 military aircraft to the U.S armed forces and overseas clients, with the AH-64E Apache attack helicopters accounting for nearly half of all deliveries.
In related news, the company secured an $8.6 billion contract for Israel’s F-15 program on December 29, following a meeting between President Trump and visiting Israeli Prime Minister Benjamin Netanyahu in Florida. The contract will cover the delivery of 25 new jets, with the option to add another 25 F-15IA aircraft.
The Boeing Company (NYSE:BA) is a leading aerospace company that manufactures commercial airplanes, space systems, and defense equipment for customers in over 150 countries.
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