5 Best Defense Stocks To Buy Now

3. Lockheed Martin Corporation (NYSE:LMT)

Number of Hedge Fund Holders: 53

Analysts see promising upside to Lockheed Martin Corporation (NYSE:LMT). This January,  DZ Bank analyst Robert Czerwensky upgraded Lockheed Martin Corporation (NYSE:LMT) to Buy from Hold and reiterated his price target of $523 on the stock.

Over the past 6 months Lockheed Martin Corporation (NYSE:LMT) has returned 12.48% to investors, as of March 21, and the stock is offering a forward dividend yield of 2.52%. Lockheed Martin Corporation (NYSE:LMT) is placed third on our list of the best defense stocks to buy now.

Lockheed Martin Corporation (NYSE:LMT) was spotted on 53 hedge funds’ portfolios at the close of Q4 2022. These funds held collective positions worth $2.13 billion in the company, up from $1.69 billion in the preceding quarter with 53 positions. As of December 31, GQG Partners is the most prominent stockholder in Lockheed Martin Corporation (NYSE:LMT) and holds a stake worth $559.9 million.

Here is what Vltava Fund had to say about Lockheed Martin Corporation (NYSE:LMT) in its Q3 2022 investor letter:

“LMT is one of the world’s largest aerospace and defence companies. The war in Ukraine has reminded investors and the wider public just how important these companies are. The aerospace and defence industry in the USA is an established oligopoly. This means that a few large firms play a dominant role. While collectively they comprise an oligopoly, individually they often have monopoly positions in particular narrower segments. Their main counterparty is the US government, a key customer in what is known as a monopsonist position. This is a rather unusual situation, but one that is very advantageous for companies such as LMT.

LMT has a strong and long-term sustainable competitive advantage ensuing from the fact that its products are developed and manufactured at an extremely high level of technology and complexity, its development and contract cycles are measured in decades, and the costs for the government to switch to alternative suppliers are high. Moreover, part of the production is classified as secret, which further takes the wind out of the sails of potential competitors. This results in a very high return on capital and admittedly a slowly but steadily growing business.

In most NATO countries, which are LMT’s customers, defence outlays are based upon the size of GDP. This is currently growing very fast in nominal terms due to inflation in most countries. A number of countries have also announced significant increases in defence budgets, whether it be Germany, which aims to get to the NATO-agreed 2% of GDP, or Poland, which wants to spend more than twice as much on defence…” (Click here to see the full text)