In this article, we will discuss the 5 best defense stocks to buy now. If you want to explore similar stocks, you can go to 12 Best Defense Stocks To Buy Now.
5. Northrop Grumman Corporation (NYSE:NOC)
Number of Hedge Fund Holders: 49
At the end of the fourth quarter of 2022, 49 hedge funds were long Northrop Grumman Corporation (NYSE:NOC) and held stakes worth $1.53 billion in the company. This is compared to 46 positions in the preceding quarter with stakes worth $1.05 billion. As of December 31, GQG Partners is the leading shareholder in the company and has a stake worth $428 million.
On January 31, Wells Fargo analyst Matthew Akers raised his price target on Northrop Grumman Corporation (NYSE:NOC) to $470 from $460 and maintained an Equal Weight rating on the shares. As of March 21, the stock is trading at a PE multiple of 14x and is offering a forward dividend yield of 1.54%. Northrop Grumman Corporation (NYSE:NOC) is placed fifth among the best defense stocks to buy now.
Here is what LRT Capital had to say about Northrop Grumman Corporation (NYSE:NOC) in its October 2022 investor letter:
“Based in Virginia, Northrop Grumman Corporation (NYSE:NOC) is one of the world’s largest defense contractors with annual revenue more than $30 billion. The company operates in a cozy oligopoly, that after decades of consolidation the US defense market is now controlled by five large companies: The Boeing Company (BA), General Dynamics Corporation (GD), Lockheed Martin Corporation (LMT), Northrop Grumman Corporation (NOC), and Raytheon Technologies Corporation (RTX).
Industry barriers to entry are immense, government procurement cycles are extremely long, and the consolidated industry structure reflects this. This industry structure has allowed Northrop to earn stable mid-teens returns on invested capital (ROIC) and grow earnings per share at a rate of over 13% per year in the past decade, despite a topline that has grown only in-line with inflation. Even after the recent run-up in the stock price, it trades at approximate 15x, next year’s earnings estimates, far below the S&P 500 index, despite being an above average company. While nominally, there are five major defense contractors, the true industry concentration is even higher because not all companies compete in all possible business segments. General Dynamics’ division submarine division, Electric Boat, is the sole supplier of nuclear power submarines in the United States. Lockheed Martin is the sole supplier of the F-35 and F-22. Northrop was the sole bidder on the contract to develop the next generation of intercontinental ballistic missiles; and so on…” (Click here to read the full text)
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