This article looks at the 11 Best Military Drone Stocks to Buy According to Hedge Funds.
Demand for next-generation, low-cost military technology has surged in recent times as countries modernize their militaries with AI-powered drones and unmanned vehicles that are cheap and cut dependence on ground forces.
Swarms of UAVs, guided by AI, now fill the skies and can strike enemy targets with pinpoint accuracy. These aerial vehicles offer a bird’s eye view of the battlefield, making it difficult for targets to move and hide from the conflict zone.
The NYSE Arca Defense Index has returned 45% YTD, as of the close on October 3, comfortably outpacing the broader market, which has gained 14% during the period. Mid-to-small cap firms have been the major gainers on the index, with drone makers leading the pack.
Much work is also going into guarding against the threats posed by UAVs. Last week, the Defense Innovation Unit (DIU) selected Zone 5 Technologies and Anduril Industries to develop prototype solutions to intercept and neutralize larger, adversarial drones.
With that said, let’s now head over to the list of the best drone stocks to invest in.
Palmer Luckey of Anduril
Methodology
We sampled stocks from ETFs with exposure to military drones and our previous articles on the subject. Both pure-play military drone makers and defense contractors with drone programs were included in our pool. From there, we selected the 11 stocks with the highest number of hedge fund investors, based on Insider Monkey’s database of 983 prominent hedge funds as of Q2 2025. Where stocks were tied on hedge fund sentiment, we used the higher market cap value as a tie-breaker between them.
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).
11 Best Military Drone Stocks to Buy According to Hedge Funds:
11. Redwire Corporation (NYSE:RDW)
Number of Hedge Fund Holders: 22
Redwire Corporation (NYSE:RDW) is among the 11 Best Military Drone Stocks to Buy According to Hedge Funds. The company was recently awarded a contract by Axiom Space to build and deliver roll-out solar array wings for Axiom Station’s Payload Power Thermal Module (AxPPTM).
Under the assembly sequence, Axiom intends to attach its AxPPTM to the International Space Station (ISS) as the first module, followed by Habitat 1 (AxH1), an airlock, Habitat 2 (AxH2), and the Research and Manufacturing Facility (AxRMF). After the launch and berthing of the AxPPTM to the ISS, the module will separate and rendezvous with AxH1 in orbit, leading to independent operational capability for the Axiom Station.
This approach will allow the two-module station to turn into a free-flyer by 2028 and an independent four-module station by 2030, making sure that American human presence in LEO continues after the ISS retires.
Redwire Corporation (NYSE:RDW)’s roll-out solar array technology has a success rate of 100% when it comes to on-orbit performance. It is being used on several commercial and civil missions, including the ISS, NASA’s DART mission, and Thales Alenia Space’s Space Inspire satellites.
While commenting on the contract, Axiom’s CEO Tejpaul Bhatia said that Redwire Corporation (NYSE:RDW)’s expertise in developing advanced spacecraft technology will aid the station’s global customers in research, innovations, discoveries, and scaling, which would benefit humanity.
10. Textron Inc. (NYSE:TXT)
Number of Hedge Fund Holders: 29
Textron Inc. (NYSE:TXT) is among the 11 Best Military Drone Stocks to Buy According to Hedge Funds. On September 22, the company announced that Textron Systems Corporation had delivered the XM204 Top Attack Munition to the Army in aid of U.S. Army Europe operations.
The anti-vehicle terrain shaping system’s delivery came under the current XM204 LRIP contract, and follows the completion of the U.S. Army-led First Article testing in April this year, certifying the system for delivery to the Army and its allies. The program is being managed by the JPEO A&A, PM CCS, and PdM TSO.
The certification verified XM204’s self-destruct and target engagement technologies and ensured Textron Inc. (NYSE:TXT)’s readiness to fulfill military orders both at home and for American allies looking for counter-mobility capability.
The XM204 offers top attack and standoff capabilities. It is designed to aid in terrain shaping operations by supporting various counter mobility tasks like blocking, disrupting, and turning an enemy force. According to Textron Inc. (NYSE:TXT), the anti-vehicle munition is also highly portable and quickly emplaced. Moreover, it can be employed alone, in tandem, or in multiples with other terrain shaping systems.
9. AeroVironment, Inc. (NASDAQ:AVAV)
Number of Hedge Fund Holders: 31
AeroVironment, Inc. (NASDAQ:AVAV) is among the 11 Best Military Drone Stocks to Buy According to Hedge Funds. On September 29, Raymond James analyst Brian Gesuale lifted the stock’s price target to $348 from $300 while maintaining a Strong Buy rating for its shares.
The firm described the company’s investor day during the week (September 30), in which it was also to unveil the ‘new AV’, as a positive catalyst. Moreover, Gesuale told analysts in a research note that Raymond James anticipates AeroVironment, Inc. (NASDAQ:AVAV) will lay out a plan to double its revenue by 2030.
On October 1, Jefferies analyst Greg Konrad also hiked the stock’s price target to $365 from $320 and maintained a Buy rating on its shares, following the investor open house. The firm said AeroVironment, Inc. (NASDAQ:AVAV) was well placed to benefit from “a once in a generational shift”, given the under-investment in defense by America and its allies over the past 15 years.
AeroVironment, Inc. (NASDAQ:AVAV) designs and manufactures unmanned aerial vehicles, ground robot systems, and loitering munition systems. The stock has surged 125% YTD, as of the close on October 1.
8. Elbit Systems Ltd. (NASDAQ:ESLT)
Number of Hedge Fund Holders: 31
Elbit Systems Ltd. (NASDAQ:ESLT) is among the 11 Best Military Drone Stocks to Buy According to Hedge Funds. On September 30, JPMorgan initiated coverage of the stock with a Neutral rating and announced a price target of $520 for its shares.
Analyst Seth Seifman noted the company’s strong growth prospects, but also pointed out that the stock had already more than doubled this year, hinting that JPMorgan is looking for a better entry point:
“Elbit is an Israeli-based, geographically diverse global defense company with exposure to several growing markets and margin expansion potential. Nevertheless, the stock is up 157% the past year versus 18% for market.”
Seifman also highlighted Elbit Systems Ltd. (NASDAQ:ESLT)’s impressive sales growth in 2024 and during the first half of this year, driven by demand for missiles, munitions, and protective equipment. The analyst has projected full-year sales growth of 16% for the company in 2025, taking its revenue close to the $8 billion mark, with double-digit growth anticipated again next year.
According to JPMorgan, Elbit Systems Ltd. (NASDAQ:ESLT)’s top-line momentum should also help profitability flourish. The firm forecasts adjusted EBIT margin to grow from 8.1% last year to 9% this year and 10.1% by 2026.
7. Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS)
Number of Hedge Fund Holders: 33
Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) is among the 11 Best Military Drone Stocks to Buy According to Hedge Funds. On September 29, the company announced the completion of the Preliminary Design Review (PDR) for the SDA’s Advanced Fire Control Ground Integration (AFCGI) system.
The PDR’s completion with zero liens will allow the program’s advancement on an accelerated timeline, in line with projected launch milestones. Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) was awarded a $116.7 million prime contract for the AFCGI program last year.
The program integrates resilient ground systems, advanced software, and secure networks into a unified architecture for real-time fire control. This will help provide the warfighters with immediate, mission-relevant benefits. The company completed the PDR in April this year, only five months after the contract was awarded.
Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) will operate a secure cloud environment, manage ground segment resources, and run a government-owned, contractor-operated demonstration center for partner system and mission software integrations.
The firm will also offer engineering, integration, program management, testing, and operations for the complete ground structure. Moreover, it will leverage its OpenSpace platform to ensure software-defined scalability in aid of complex requirements of the program.
6. Northrop Grumman Corporation (NYSE:NOC)
Number of Hedge Fund Holders: 42
Northrop Grumman Corporation (NYSE:NOC) is among the 11 Best Military Drone Stocks to Buy According to Hedge Funds. On September 28, the company announced that it had successfully demonstrated rendezvous, docking, and proximity operations with Starlab Space Stations and Voyager Technologies.
This marks the latest breakthrough in building a fully autonomous capability for the company’s Cygnus spacecraft. As part of a 2023 agreement, Northrop Grumman Corporation (NYSE:NOC) will be adapting the spacecraft to dock and offer cargo delivery missions to LEO space stations, which will help support the next generation of space exploration.
The evolution of Cygnus to meet commercial customers’ requirements heralds a new chapter for Northrop Grumman Corporation (NYSE:NOC) in its quest to advance the commercial LEO economy.
NOC is one of the largest defense contractors in the world. The stock has had impressive returns in 2025, gaining 29% YTD, as of the close of business on October 2.
5. L3Harris Technologies, Inc. (NYSE:LHX)
Number of Hedge Fund Holders: 53
L3Harris Technologies, Inc. (NYSE:LHX) is among the 11 Best Military Drone Stocks to Buy According to Hedge Funds. On September 30, the company announced that the U.S. Space Force had declared operational acceptance for the Advanced Tracking and Launch Analysis System (ATLAS) it had designed and built.
The system combines space domain awareness, intelligence, command and control, and data related to operations and system-readiness to enable warfighters to effectively respond to emerging anti-satellite threats.
Ed Zoiss, President, Space and Airborne Systems at L3Harris Technologies, Inc. (NYSE:LHX) stated the following on the development:
“This pivotal milestone aligns with Chief of Space Operations Gen. B. Chance Saltzman’s top priorities at the Space Force to help ensure space superiority, an essential element of our country’s national security. The Space Force requires timely, accurate, and relevant information to avoid operational surprise, and ATLAS meets this demand by providing essential and actionable space domain awareness.”
In March this year, L3Harris Technologies, Inc. (NYSE:LHX) was awarded a $90 million contract to develop, integrate, and provide astrometric tools to enhance the capabilities of ATLAS.
4. Honeywell International Inc. (NASDAQ:HON)
Number of Hedge Fund Holders: 67
Honeywell International Inc. (NASDAQ:HON) is among the 11 Best Military Drone Stocks to Buy According to Hedge Funds. The company recently announced that increase its regular annual cash dividend, effective from the fourth quarter of 2025.
In a press release dated September 26, the firm said its Board of Directors had approved to raise the dividend from $4.52 to $4.76 per share, beginning from the fourth quarter dividend of $1.19, which was declared on the same day, and is payable on December 5 to shareholders of record as of the close of November 14.
Vimal Kapur, Chairman and CEO of Honeywell International Inc. (NASDAQ:HON) was quoted as saying the following:
“Our decision to raise the dividend reflects both our focus on value creation and our confidence in the future. As we prepare to transform into three independent companies, each with the assets, scale and technology to thrive as market leaders, we remain committed to maximizing shareholder value and unlocking new benefits for all stakeholders.”
This marks the 16th instance in 15 successive years that Honeywell International Inc. (NASDAQ:HON) has hiked its annual dividend.
The company helps organizations address their most complex challenges in aviation, automation, and energy transition. It is also an important player in the military drone market.
3. RTX Corporation (NYSE:RTX)
Number of Hedge Fund Holders: 71
RTX Corporation (NYSE:RTX) is among the 11 Best Military Drone Stocks to Buy According to Hedge Funds. Recently, Raytheon delivered its 500th ESSM Block 2 missile to the U.S. Navy.
In a press release shared on October 1, the company said that it was investing on materials and infrastructure to continue deliveries, with the aim of doubling production rates by mid-2026.
The advanced surface-to-air missile has proven its efficacy against several air and sea-surface threats. Its features include an upgraded guidance system, which offers dual-mode active and semi-active radar seeker, enhanced performance, and better maneuverability compared to the Block 1 predecessor.
Barbara Borgonovi, president of Naval Power at RTX Corporation (NYSE:RTX)’s Raytheon business, stated the following on the development:
“ESSM plays a crucial role in helping to ensure both ship self-defense and local area defense for U.S. and allied navies around the globe. The continued delivery of this capability is a testament to the strong partnerships and shared commitment among our team, our customers, and our allied nations to equip our servicemen and women with the best defense solutions.”
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.
The stock has had impressive returns this year, gaining nearly 44% year-to-date, as of the close of business on October 3.
2. Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 73
Lockheed Martin Corporation (NYSE:LMT) is among the 11 Best Military Drone Stocks to Buy According to Hedge Funds. On September 26, the company announced that its subsidiary, Sikorsky, had received a five-year contract from the U.S. Navy, valued at nearly $11 billion, to build up to 99 CH-53K King Stallion helicopters for the Marine Corps.
The defense company said this is the largest order to date for the aircraft and will ensure consistent delivery of the helicopter between 2029 and 2034. It will also help in reinforcing America’s industrial base through the sustainment of thousands of production jobs at Sikorsky and its supply chain.
Rich Benton, SVP and GM at Lockheed Martin Corporation (NYSE:LMT)’s Sikorsky, stated the following on the contract award:
“This award reflects trust and confidence in Sikorsky to deliver these technologically advanced, heavy-lift helicopters that will revolutionize the Marine Corps’ operational capabilities by adding unrivaled power, performance, survivability and dependability to the fleet. The multi-year contract enables Sikorsky to partner with the Department of the Navy to drive long-term affordability, optimize production efficiencies and stabilize our supply chain and workforce, ensuring the Marines maintain the strategic advantage with the CH-53K in a rapidly evolving battlespace.”
In other related news, last month the New Zealand government announced to spend NZ$2 billion to buy five MH-60R Seahawk helicopters, manufactured by Lockheed Martin Corporation (NYSE:LMT)’s Sikorsky unit.
1. The Boeing Company (NYSE:BA)
Number of Hedge Fund Holders: 101
The Boeing Company (NYSE:BA) is among the 11 Best Military Drone Stocks to Buy According to Hedge Funds. According to a recent report in the Wall Street Journal (WSJ), the planemaker is in the initial stages of building a new single-aisle aircraft, which would eventually become a replacement forthe 737 MAX.
The 737 MAX entered service in 2017, before being grounded two years later after two fatal air crashes, which not only triggered lawsuits and criminal probes against The Boeing Company (NYSE:BA), but also badly hurt its financial position.
The grounding order was lifted by the Federal Aviation Administration (FAA) in 2020. On September 26, it was reported that the FAA would allow the aerospace company to issue airworthiness certificates for some 737 MAX and 787 airplanes after years of revoking the authority.
The WSJ also reported that The Boeing Company (NYSE:BA)’s CEO met with officials from Rolls-Royce earlier in the year to discuss a new engine for the aircraft, while adding that the company has also been designing a flight deck for a new narrow-body plane with development currently in the planning phase.
While we acknowledge the potential of BA 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 BA and that has 100x upside potential, check out our report about the cheapest AI stock.
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