In this article, we will discuss 10 Most Undervalued Defense Stocks to Buy According to Analysts.
While investing in defense stocks, billionaire investors and hedge fund managers are not reacting to headlines; they are reacting to something far more enduring: a world in which geopolitical risk has become a permanent feature, not a temporary shock. In that environment, defense has quietly reasserted itself as one of the most structurally reliable sectors in global equities.
Unlike cyclical industries that rise and fall with consumer demand or credit conditions, defense spending is anchored by government budgets, strategic alliances, and national security priorities. For sophisticated investors, that makes the sector less of a trade and more of a long-duration annuity stream disguised as an industrial business. Investors in the mold of Warren Buffett have long appreciated this dynamic, with companies such as Lockheed Martin and Northrop Grumman offering predictable cash flows, multi-year contract visibility, and high barriers to entry.
Macro investors see an even broader picture. For managers like Ray Dalio, defense spending is not discretionary—it is a reflection of global order, power competition, and alliance commitments. As geopolitical tensions rise and military budgets expand across NATO and Asia, defense contractors increasingly benefit from structural demand rather than economic cycles.
Hedge funds are particularly drawn to this visibility. In an environment where earnings uncertainty dominates much of the market, defense offers something rare: order books that extend years into the future and revenue streams tied to sovereign priorities rather than consumer sentiment. That makes the sector especially attractive during periods of heightened volatility or geopolitical stress.
Yet this is not a momentum trade. The smart money approach is highly selective, concentrating on large, diversified defense primes with strong balance sheets, deep government relationships, and dominant positions in critical systems.
The bottom line is simple: defense stocks are not driven by innovation cycles or hype narratives. They are driven by something far more persistent—the cost of security in an unstable world. And for hedge funds navigating a more fragmented global order, that makes them one of the most quietly dependable allocations in the market.
With this context in mind, here are some of the most undervalued defense stocks to buy according to analysts.
Our Methodology
We used screeners to identify defense stocks with a forward P/E ratio below 20. We limited our final selection to companies that have recently reported noteworthy developments likely to impact investor sentiment. These stocks are also popular among analysts and elite hedge funds. We have ranked the stocks in descending order of their forward P/E to make the list easier to navigate.
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 498.7% since May 2014, beating its benchmark by 303 percentage points (see more details here).
10 Most Undervalued Defense Stocks to Buy According to Analysts
10. Cadre Holdings, Inc. (NYSE:CDRE)
Forward P/E: 19.57
Cadre Holdings, Inc. (NYSE:CDRE) announced on March 26 that it has entered into an agreement to acquire Alien Gear Holsters, along with selected assets from Tedder Industries, LLC, for $10.3 million through a court-supervised bankruptcy auction process. Management highlighted that the transaction provides an opportunity to acquire a well-recognized holster brand with an established direct-to-consumer footprint, bringing in an experienced team with a customer-centric approach. The acquisition is expected to generate operational synergies under Cadre’s existing operating model, with completion anticipated in the second quarter of 2026, subject to regulatory and bankruptcy court approvals.
On March 15, Jefferies reduced its price target on Cadre Holdings, Inc. (NYSE:CDRE) to $45 from $55 while maintaining a Buy rating on the stock. The firm noted that Cadre’s fourth-quarter earnings missed expectations by 36%, with nuclear safety revenues declining 7% in fiscal 2025, although it also emphasized that the recent share price decline of 13% presents an attractive entry point. Despite near-term volatility, Jefferies reiterated that the company’s core investment thesis remains fundamentally intact.
Cadre Holdings, Inc. (NYSE:CDRE) is a global manufacturer and distributor of safety and survivability equipment used by law enforcement agencies, first responders, and military personnel. The company is headquartered in Jacksonville, Florida, and its modern corporate structure was established in 2012, although its operational roots date back to 1964.
The acquisition of Alien Gear strengthens Cadre Holdings, Inc. (NYSE:CDRE)’s consumer-facing portfolio and enhances its exposure to the expanding tactical equipment market, supporting longer-term revenue diversification. Despite near-term earnings pressure highlighted by Jefferies, the combination of brand expansion and disciplined acquisition strategy reinforces Cadre’s positioning as a consolidator in mission-critical safety equipment markets.
9. AAR Corp. (NYSE:AIR)
Forward P/E: 19.53
AAR Corp. (NYSE:AIR) announced on April 22 that it entered into a multi-year commercial distribution agreement with Woodward, Inc., expanding an existing relationship between the two companies. Under the arrangement, AAR will act as the preferred distributor of Woodward’s high-demand consumable components, including fuel filters, gaskets, and seals, for the CFM LEAP, GEnx, and CF34 engine platforms sold directly to commercial airlines. These components are essential to engine reliability and operational efficiency, and the agreement allows airline customers to access inventory through AAR’s global warehouse network with faster fulfillment and dependable support, particularly during Aircraft on Ground events.
On April 21, AAR Corp. (NYSE:AIR) also introduced Airvoyant, an artificial intelligence-driven aviation procurement platform designed to modernize sourcing and purchasing workflows. The solution enables buyers to connect directly with suppliers, search available inventory, obtain and consolidate quotations, and complete purchasing decisions through a simplified one-click process. Built on infrastructure provided by Amazon Web Services, the platform integrates with Aeroxchange’s network of more than 5,000 suppliers, significantly broadening procurement reach and efficiency for customers.
AAR Corp. (NYSE:AIR) is a leading independent aerospace and defense contractor that provides maintenance, repair, and overhaul services, aviation parts supply, and integrated operational solutions to commercial airlines and government customers worldwide. The company is headquartered in Wood Dale and was founded in 1951 by Ira Allen Eichner before being incorporated in 1955.
AAR Corp. (NYSE:AIR)’s expanded partnership with Woodward strengthens its recurring parts distribution business while increasing exposure to some of the most widely used commercial aircraft engines, supporting long-term revenue visibility. At the same time, the launch of Airvoyant demonstrates the company’s ability to leverage digital innovation to improve procurement efficiency, positioning the stock as an attractive way to gain exposure to both aerospace aftermarket growth and technology-driven margin expansion.
