This article looks at the 10 best performing defense stocks so far in 2025.
The world has been rocked with deadly conflicts over the last few years, with Ukraine and the Middle East up in flames. While the human impact of these wars 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.
READ ALSO: 11 Best American Defense Stocks to Buy Now and 13 Best Defense Stocks to Buy According to Billionaires.
However, American defense stocks have been shaky this year amid mixed statements from the Trump administration on future military spending. Shares fell sharply in February after the US President mentioned he could significantly cut defense expenditure in the future. He made these comments in the context of a potential future conference with China and Russia to discuss cutting military expenditure to spend the money in other areas:
“At some point, when things settle down, I’m going to meet with China and I’m going to meet with Russia, in particular those two, and I’m going to say there’s no reason for us to be spending almost $1 trillion on the military and I’m going to say we can spend this on other things.”
The creation of DOGE has also reshaped investors’ views of the industry. On March 3, the Pentagon, working with DOGE, found some $80 million in what it deemed wasteful funding, which included funds devoted to diversity, equity and inclusion programs, and climate change research.
Despite the downturn, Citi analyst Jason Gursky believes this is the right time to invest in American defense stocks. In a note to clients on March 5, he argued that as long as the global threat environment remains and the United States maintains its leadership role, regardless of whether it is as a sole superpower or as a power in a multi-polar world order, defense spending is expected to remain robust, which would benefit stocks in the sector.
Two recent developments have reinvigorated investor interest in defense stocks. On March 21, Trump unveiled a new next-generation fighter jet, the F-47, to replace the F-22 Raptor. The jet will be for air superiority and have stealth and penetration capabilities that exceed those of the current fleet. The initial contract to proceed with the production is expected to cost approximately $20 billion.
The move adds to the positive momentum after President Trump’s announcement earlier in the month to resurrect America’s military and commercial shipbuilding industry, which he sees as vital to national security, given the strategic competition with China.
With that said, let’s now head over to the list of the best performing stocks in the defense sector so far in 2025.
Photo by Cibi Chakravarthi on Unsplash
Our Methodology
For this article, we went through screeners to identify stocks in the aerospace and defense industry. From there, we picked the top 10 stocks with the highest year-to-date percentage gains in share price, as of the close of business on March 25, 2025. Pure-play aerospace stocks that do not deal in defense contracts have been excluded from the list.
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).
10 Best Performing Defense Stocks So Far in 2025
10. Karman Holdings Inc. (NYSE:KRMN)
YTD Gains as of March 25: 24.43%
Karman Holdings Inc. (NYSE:KRMN) specializes in the manufacturing and sale of mission-critical systems for missile, space, and defense programs.
The stock debuted on the NYSE on February 13 and was valued at nearly $4 billion after shares shot up from its initial public offering price of $22 per share to $30.05 on the first day of trading. As of the close of business on March 25, Karman Holdings Inc. (NYSE:KRMN) had gained 24.43% year-to-date, with a market capitalization of $4.94 billion.
Industry experts credit Karman Holdings Inc.’s (NYSE:KRMN) rise to investor appetite for defense and space firms under the new White House administration, with expectations that Trump would push ahead with a race to Moon and Mars, given his friendship with Elon Musk.
Last month, the US President signed an executive order to mandate the process of building an ‘American Iron Dome’, which also presents an opportunity for the company to benefit, given its expertise in areas like hypersonic missile defense.
On March 10, several analysts initiated coverage of Karman Holdings Inc. (NYSE:KRMN) with Buy ratings and impressive price targets, representing a high average upside potential. It is one of the best performing stocks in 2025.
9. Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS)
YTD Gains as of March 25: 24.94%
Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) is an American company that develops and fields transformative and affordable products and platforms for national security needs. It is involved in various technological areas, such as unmanned systems, C5ISR, satellite communications, warfighter training, and combat systems.
On March 24, the company announced its addition to the market’s SmallCap Index. The milestone reflected Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS)’s continued growth, innovation, strong financial position, and strategic investments in critical national security capabilities.
Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) recently declared impressive results for the fiscal year 2024, with a 9.1% organic growth in revenue. GAAP net income for the full year was reported at $16.3 million, compared to a net loss of $8.9 million in 2023. Adjusted EPS was logged at $0.49, growing 17% year-over-year.
The company has also received notable high-value contracts this month, which has added to the investor optimism around the stock. On March 11, Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) secured a potential $50 million deal from the Naval Surface Warfare Center to design and manufacture short, medium-range suborbital vehicles. Later, on March 17, it was awarded a contract for the BQM-177A Subsonic Aerial Target System from the Naval Air Systems Command, with a potential value of up to $19.1 million.
Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) also recently announced the groundbreaking of a $50 million Hypersonic System Indiana Payload Integration Facility in Indiana to support critical hypersonic vehicle and payload activities and systems for the MACH-TB. It is one of the best performing stocks in 2025, with year-to-date gains of nearly 25%.
Hedge Fund Resource Center