In this article, we will discuss the 12 best defense stocks to buy now. If you want to explore similar stocks, you can also take a look at 5 Best Defense Stocks To Buy Now.
A Chinese spy balloon along with 3 other unidentified high-altitude objects have been shot down by the U.S. so far. On March 14, a U.S. drone was shot down by a Russian fighter jet over the black sea. The Russian Su-27 damaged the propellor of the American MQ-9 Reaper drone, after flying in close proximity over it, and forced it down. Meanwhile, the Ukraine war is still ongoing and there is still no end in sight, rather there is a risk of the war escalating.
Defense Analyst: “There’s A Pretty Good Long-Term Setup”
On February 13 Cowen’s defense and aerospace analyst, Roman Schweizer appeared in an interview on CNBC and to discuss the geopolitical situation and his view on the defense sector and defense stocks. “This is a very peculiar period in time”, said Schweizer as he talked about the recent airborne objects shot down in North America. Schweizer thinks that unidentified objects flying at such high altitude can pose risk to commercial air travel. Here are some comments from Roman Schweizer about the U.S. defense budget, potential budget cuts, and defense stocks:
“I’d say that the group (defense stocks) has underperformed, since the GOP (Republicans) kinda came out with wanting those what would be potentially 10% spending cuts. Really, when you look at the backlog in spending, 2 years ago the budget was up 7%, last year up 10%. We estimate there’s about $37 billion in funds for Ukraine that haven’t been put on contract for some of the large defense primes. So the pump is primed and as soon as we get into some of the budgetary details, if any of that overhang lifts, it certainly is gonna bode well for the companies.”
Roman Schweizer is positive on the defense sector and sees it driving outperformance. Schweizer thinks the consensus is that the Ukraine war is a “multi-year conflict” and defense spending is going up in not just the U.S., but also in Japan and Europe. Schweizer also noted that the supply-chain issues and labor shortages due to COVID-19 are also fading away and the defense sector is “starting to operate better”. Finally, Roman Schweizer said that he thinks “there’s a pretty good long-term setup” for defense stocks.
As the Ukraine war enters its second year, geopolitical risk is rising and defense spending is going up with it. On March 13, the U.S. Department of Defense released the proposed defense budget for fiscal 2024. The Biden-Harris Administration has submitted a request to Congress to increase the defense budget for fiscal 2024 to $842 billion, up $26 billion from fiscal 2023.
Amid rising geopolitical tensions, the outlook for the defense sector is starting to look attractive. As of March 21, the iShares U.S. Aerospace & Defense ETF (BATS:ITA) has gained 1.55% year to date, and has gone up by 16.65% over the past 6 months. Some of the best defense stocks to buy now according to analysts and hedge funds include Northrop Grumman Corporation (NYSE:NOC), Lockheed Martin Corporation (NYSE:LMT), and The Boeing Company (NYSE:BA).
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Our Methodology
We screened for companies operating in the defense sector and picked the 30 largest companies operating in the space. We then sourced the hedge fund sentiment for these companies from Insider Monkey’s proprietary database of over 900 elite money managers. We narrowed down our selection to stocks that were the most widely-held by hedge funds. We have ranked these stocks in ascending order of the number of hedge funds that have stakes in them.
12 Best Defense Stocks To Buy Now
12. Curtiss-Wright Corporation (NYSE:CW)
Number of Hedge Fund Holders: 22
On February 21, Curtiss-Wright Corporation (NYSE:CW) posted strong earnings for the fourth quarter of fiscal 2022. The company generated a revenue of $757.67 million, up 13.63% year over year and ahead of market estimates by $5.44 million. The company reported an EPS of $2.92 and outperformed EPS expectations by $0.01.
This February, Truist analyst Michael Ciarmoli raised his price target on Curtiss-Wright Corporation (NYSE:CW) to $190 from $183 and maintained a Buy rating on the shares.
Curtiss-Wright Corporation (NYSE:CW) was held by 22 hedge funds at the end of Q4 2022. These funds held positions worth $233.5 million in the company, up from $174.4 million in the previous quarter when 18 hedge funds held stakes in the company. The hedge fund sentiment for the stock is positive.
As of December 31, Select Equity Group is the top shareholder in Curtiss-Wright Corporation (NYSE:CW) and has disclosed a stake worth $99.2 million.
In addition to Curtiss-Wright Corporation (NYSE:CW), other top defense stocks that are popular among elite hedge funds include Northrop Grumman Corporation (NYSE:NOC), Lockheed Martin Corporation (NYSE:LMT), and The Boeing Company (NYSE:BA).
11. Spirit AeroSystems Holdings, Inc. (NYSE:SPR)
Number of Hedge Fund Holders: 34
Spirit AeroSystems Holdings, Inc. (NYSE:SPR) is a leading global manufacturer of commercial aerostructures. The company operates through three divisions: Commercial, Defense & Space, and Aftermarket. As of March 21, the stock has gained 27.91% over the past 6 months.
On February 13, Barclays analyst Davis Strauss raised his price target on Spirit AeroSystems Holdings, Inc. (NYSE:SPR) to $50 from $42 and maintained an Overweight rating on the shares. The stock is one of the best defense stocks to buy now according to hedge funds and analysts.
At the end of Q4 2022, 34 hedge funds were long Spirit AeroSystems Holdings, Inc. (NYSE:SPR) and disclosed stakes worth $280.5 million in the company. Of those, Marshall Wace LLP was the leading investor in the company and disclosed a position worth $67 million.
10. Howmet Aerospace Inc. (NYSE:HWM)
Number of Hedge Fund Holders: 35
Howmet Aerospace Inc. (NYSE:HWM) is an American manufacturer of jet engine components, fasteners and titanium structures for aerospace applications. The stock is placed tenth among the best defense stocks to buy now. On February 14, the company released earnings for the fourth quarter of fiscal 2022. Howmet Aerospace Inc. (NYSE:HWM) reported an EPS of $0.38 and generated a revenue of $1.51 billion, up 17.74% year over year and ahead of Wall Street consensus by $44.12 million.
This February, Argus raised its price target on Howmet Aerospace Inc. (NYSE:HWM) to $49 from $43 and reiterated a Buy rating on the shares.
Howmet Aerospace Inc. (NYSE:HWM) was spotted on 35 investors’ portfolios at the end of Q4 2022. These funds disclosed collective stakes worth $2.94 billion in the company, up from $2.67 billion in the preceding quarter with 46 positions. As of December 31, Elliott Management is the most prominent shareholder in Howmet Aerospace Inc. (NYSE:HWM) and has disclosed a position worth $1.36 billion.
9. Textron Inc. (NYSE:TXT)
Number of Hedge Fund Holders: 36
On February 2, Textron Inc. (NYSE:TXT) declared a quarterly cash dividend of $0.02 per share. The dividend is payable on April 1 to stockholders of record on March 10. As of March 21, the stock is offering a forward dividend yield of 0.12%.
As of December 6, Morgan Stanley analyst Kristine Liwag has an Overweight rating and a $84 price target on Textron Inc. (NYSE:TXT). The stock has gained 12.49% over the past 6 months, as of March 21, and is trading at a PE multiple of 17x.
At the close of the fourth quarter of 2022, 36 hedge funds were eager on Textron Inc. (NYSE:TXT) and held collective positions worth $819.5 million in the company. This is compared to 28 hedge funds in the previous quarter with stakes worth $626.8 million. The hedge fund sentiment for the stock is positive.
As of December 31, AQR Capital Management is the largest stockholder in Textron Inc. (NYSE:TXT) and has a stake worth $133 million.
8. L3Harris Technologies, Inc. (NASDAQ:LHX)
Number of Hedge Fund Holders: 45
At the end of the fourth quarter of 2022, 45 hedge funds were bullish on L3Harris Technologies, Inc. (NASDAQ:LHX) and disclosed stakes worth $1.28 billion in the company. This is compared to 39 positions in the preceding quarter with stakes worth $680.2 million. The hedge fund sentiment for the stock is positive.
On January 30, Morgan Stanley analyst Kristine Liwag updated her price target on L3Harris Technologies, Inc. (NASDAQ:LHX) to $264 from $278 and maintained an Overweight rating on the shares. The stock is placed eighth on our list of the best defense stocks to buy now according to analysts and hedge funds.
On February 24, L3Harris Technologies, Inc. (NYSE:LHX) raised its quarterly dividend to $1.14 per share, up 1.8% from its prior dividend of $1.12. The dividend is payable on March 24 to investors or record on March 10. As of March 21, the stock is offering a forward dividend yield of 2.31%
As of December 31, Diamond Hill Capital is the leading shareholder in L3Harris Technologies, Inc. (NASDAQ:LHX) and has a position worth $233.8 million.
7. General Dynamics Corporation (NYSE:GD)
Number of Hedge Fund Holders: 46
General Dynamics Corporation (NYSE:GD) is one of the best defense stocks to buy now. On March 9, the company declared a quarterly cash dividend of $1.32 per common share, up 4.8% from its prior dividend of $1.26. The divided is payable on May 12 to stockholders of record on April 13. As of March 21, General Dynamics Corporation (NYSE:GD) is offering a forward dividend yield of 2.42% and is trading at a PE multiple of 18x.
This January, Morgan Stanley analyst Kristine Liwag raised her price target on General Dynamics Corporation (NYSE:GD) to $248 from $243 and maintained an Equal Weight rating on the shares.
General Dynamics Corporation (NYSE:GD) was a part of 46 investors’ portfolios at the end of Q4 2022. These funds held collective positions worth $8.22 billion in the company, up from $7.10 billion in the preceding quarter with 35 positions. The hedge fund sentiment for the stock is positive.
As of December 31, Longview Asset Management is the top investor in General Dynamics Corporation (NYSE:GD) and has a stake worth $7 billion.
6. HEICO Corporation (NYSE:HEI)
Number of Hedge Fund Holders: 48
Wall Street is bullish on HEICO Corporation (NYSE:HEI). This March, Truist analyst Michael Ciarmoli raised his price target on HEICO Corporation (NYSE:HEI) to $190 from $169 and maintained a Buy rating on the shares. As of March 21, the stock has returned 12.78% to investors over the past 6 months.
At the end of Q4 2022, HEICO Corporation (NYSE:HEI) was held by 48 hedge funds. These funds disclosed positions worth $975.7 million in the company, up from $714.6 million in the previous quarter when 42 hedge funds held stakes in the company. The hedge fund sentiment for the stock is positive.
As of December 31, Citadel Investment Group is the largest investor in HEICO Corporation (NYSE:HEI) and holds a stake worth $128.5 million.
Other defense stocks that Wall Street analysts are positive on include Northrop Grumman Corporation (NYSE:NOC), Lockheed Martin Corporation (NYSE:LMT), and The Boeing Company (NYSE:BA).
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Disclosure: None. 12 Best Defense Stocks To Buy Now is originally published on Insider Monkey.