7 Best Mid-Cap Defense Stocks to Invest In

This article looks at the 7 Best Mid-Cap Defense Stocks to Invest In.

Shares of several leading defense contractors fell this week after President Trump’s announcement of a two-week ceasefire with Iran following a request from Pakistan. The United States has agreed to halt the bombings, subject to Tehran reopening the Hormuz Strait.

While the ceasefire appears fragile and hostilities could resume in the Middle East, defense stocks are unlikely to see a surge, according to American financial magazine Barron’s.

The iShares U.S. Aerospace & Defense ETF has gained 6% year-to-date, outpacing the S&P 500’s 1% dip, but has slumped nearly 8% since the start of the Iran war.

Despite the U.S. government’s efforts to increase production of weapons, defense stocks have not gained as much as they were expected to. This is due to the markets being forward-looking, said Barron’s. While an escalation with Iran has been looming for the past year, it is not quite clear what the endgame would look like.

Experts believe that, given the elevated valuations of defense stocks, only increased military expenditure would drive these stocks further up.

With that said, let’s now shift focus and see some of the best mid-cap defense stocks to invest in.

Methodology

For this article, we screened for mid-cap stocks that are pure-play defense companies or have significant exposure to the defense sector, using their market caps as of the close on April 10. We then shortlisted the top 7 companies that had the highest number of hedge fund investors having a stake in them, based on Insider Monkey’s database of prominent hedge funds as of Q4 2025. Finally, we ranked them in ascending order based on the number of hedge funds holding positions. When two or more stocks were tied in hedge fund sentiment, we used market cap as a tiebreaker.

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).

7 Best Mid-Cap Defense Stocks to Invest In:

7. Moog Inc. (NYSE:MOG-A)

Number of Hedge Fund Holders: 32

Moog Inc. (NYSE:MOG-A) is among the 7 Best Mid-Cap Defense Stocks to Invest In. On April 1, the company outlined its role in the successful launch of NASA’s Artemis II mission through its actuation and motion control technologies.

According to the press release, the technological provisions included the thrust vector control systems to steer the Space Launch System during ascent; actuators for the launch abort systems; fluid control and actuation technologies required for propulsion, stability, and power distribution; and lastly, the mobile launch pad actuators.

Nicole Wodka-Cook, general manager at Moog Inc. was quoted as saying the following on the launch:

“This successful launch underscores the reliability and precision our teams bring to every system, whether we’re protecting astronauts, guiding the rocket, or supporting mission-critical ground operations.”

In other news, on March 25, the company presented its new innovations at the SATELLITE 2026 Conference in Washington, D.C., and highlighted gains made in high delta-V propulsion systems, next-gen space computing, scalable satellite buses, and propulsion technologies for national security space missions.

Moog Inc. designs, manufactures, and integrates precision motions and fluid controls and control systems for manufacturers and end users in the aerospace, defense, and industrial markets. The stock has had robust returns in 2026, gaining 25% YTD as of the close on April 10.

6. V2X, Inc. (NYSE:VVX)

Number of Hedge Fund Holders: 33

V2X, Inc. (NYSE:VVX) is among the 7 Best Mid-Cap Defense Stocks to Invest In. On April 2, Citigroup’s John Godyn lifted the price target on the stock to $72 from $69 and kept a Neutral rating.

The adjustment came as the firm revised its price targets and estimates for aerospace and defense stocks as part of its first-quarter preview, according to reports.

This follows Truist Financial’s March 24 report, which maintained a Hold rating on V2X, Inc. with a price target of $68. This was a reiteration of the firm’s earlier update in late February, when it lifted the price target by three cents after the company’s 2026 guidance came in line with analysts’ expectations.

As of the close of business on April 10, the stock is a Moderate Buy based on the recommendations of 10 analysts, and has an average share price upside potential of 14%.

In other news, V2X, Inc. last week appointed Mike Uster as Chief Information Officer with immediate effect. He will lead the company’s efforts on global IT strategy, digital transformation, and enterprise systems.

Usher brings over three decades of leadership experience in enterprise IT, innovation, and technology solutions for government and industry. His most recent stint was at ManTech, serving as CIO, CTO, and SVP.

V2X, Inc. provides innovative solutions and support services that integrate the digital and physical environments. It is an important player in the defense sector, providing vital mission solutions to customers in around 47 countries worldwide.

5. Loar Holdings Inc. (NYSE:LOAR)

Number of Hedge Fund Holders: 33

Loar Holdings Inc. (NYSE:LOAR) is among the 7 Best Mid-Cap Defense Stocks to Invest In. Based on the recommendations of three analysts, the stock is a Strong Buy with an average share price upside potential of 30% as of the close on April 10.

Recent updates include Citigroup analyst John Godyn, who on April 2 cut the firm’s price target on the stock to $71 from $83 and maintained a Buy rating. The bank said it had revised estimates and price targets for stocks in the aerospace and defense sector as part of its Q1 preview.

Institutional interest in Loar Holdings Inc. is continuing to increase, with Insider Monkey’s database for Q4 2025 showing 33 hedge funds having a stake in the company, up from 29 in the prior quarter.

In other news, the company reported record results for fiscal 2025, with net sales surging 23.2% year-over-year to $496.3 million. Net income climbed from $22.2 million in the prior year to $72.1 million, with adjusted earnings per share for the full year increasing 147.6% to $1.04.

Moreover, to account for the impact of the recent acquisitions of Harper Engineering and LMB Fans & Motors, management revised its guidance upward for net sales, adjusted EBITDA, and adjusted EBITDA margin, while lowering its outlook for net income and diluted EPS for the year.

Loar Holdings Inc. designs and supplies niche aerospace and defense components for aircraft and aerospace and defense systems. The company has a robust network of relationships with original equipment manufacturers across the aerospace and defense sector.

4. Mercury Systems, Inc. (NASDAQ:MRCY)

Number of Hedge Fund Holders: 34

Mercury Systems, Inc. (NASDAQ:MRCY) is among the 7 Best Mid-Cap Defense Stocks to Invest In. On April 7, Jefferies trimmed its price target on the stock to $80 from $85, as part of an adjustment to its Q3 estimates. The firm maintained its prior Hold rating.

As of the close of business on Friday, the stock is a Moderate Buy with an average share price upside potential of 15% based on the recommendations of seven analysts.

Last week, the company secured a contract from L3Harris to supply solid-state data recorders (SSDRs) for the Space Development Agency’s Tranche 3 Tracking Layer satellite constellation.

This follows Mercury Systems, Inc.’s data recorder deliveries in the past for Tranche 0 and Tranche 1 constellations, and the recent provision of SSDRs for Tranche 2 satellites to L3Harris.

Earlier in March, Mercury announced that it was acquiring SolderMask to aid in higher-rate production across key programs. The firm is known for its prowess in dry film solder mask applications, which are used across several Mercury initiatives, including the Army’s Lower Tier Air and Missile Defense Sensor (LTAMDS) program.

Mercury Systems, Inc. provides mission-critical processing that helps enhance the accessibility of advanced technologies used in complex aerospace and defense missions. The stock has gained 9% so far in 2026.

3. AAR Corp. (NYSE:AIR)

Number of Hedge Fund Holders: 36

AAR Corp. (NYSE:AIR) is among the 7 Best Mid-Cap Defense Stocks to Invest In. On April 9, KeyBanc lifted its price target on the stock to $132 from $120, while reiterating an Overweight rating.

According to TipRanks, the firm noted a significant uptick in aerospace OEM orders, with production levels now stabilizing and supplier inventories suggesting ongoing restocking to support ramps.

KeyBanc analyst Michael Leshock described the aerospace and defense aftermarket as tight, indicating increased fleet life. He also highlighted that the conflict in the Middle East augurs well for defense demand, but warned that the resulting oil crisis could pressure air travel.

As of the close of business on April 10, AAR Corp. is a Strong Buy based on the recommendations from six analysts. The stock has a one-year average share price target of $131.20, representing an upside of 9%.

In other news, late last month, the company said it had secured two pallet contracts from the U.S. Air Force with a combined value of $450 million. This includes a $160 million agreement to provide repair services for the 463L Legacy Cargo Pallet, and a $290 million contract to manufacture 463 legacy air cargo pallets.

AAR Corp. is an aerospace and defense aftermarket solutions company that supports commercial and government clients through its wide network of operations spread across 20 countries. It operates through four segments: Parts Supply, Repair & Engineering, Integrated Solutions, and Expeditionary Services.

2. AeroVironment, Inc. (NASDAQ:AVAV)

Number of Hedge Fund Holders: 40

AeroVironment, Inc. (NASDAQ:AVAV) is among the 7 Best Mid-Cap Defense Stocks to Invest In. On April 7, the company announced that its UES division had received a three-year, $25 million contract from the U.S. Air Force to mature human health and performance technologies from research to operational use.

Under the agreement, the defense technology firm will transition technologies that have remained mainly in mid-stage development to field deployment with the aim of strengthening the capabilities of warfighters.

According to the press release, the program will focus on four main areas of sensor systems, diagnostic tools, AI or machine learning-enabled databases, and emerging biotechnology platforms.

In other news, AeroVironment, Inc. continues to remain on analysts’ radar and currently sports a Strong Buy rating. As of the close on April 10, it has an average share price upside potential of 69%.

Recent updates include one from Raymond James, which on March 23 upgraded the stock to Market Perform from Underperform. The firm’s analyst, Brian Gesuale, noted the steep pullback in the share price last month and said that the underperformance and multiple contraction had resulted in a balanced risk-reward dynamic.

AeroVironment, Inc. designs and manufactures unmanned aerial vehicles, ground robot systems, and loitering munition systems. The stock is down 26% year-to-date.

1. Astronics Corporation (NASDAQ:ATRO)

Number of Hedge Fund Holders: 43

Astronics Corporation (NASDAQ:ATRO) is among the 7 Best Mid-Cap Defense Stocks to Invest In. According to Insider Monkey’s database, 43 hedge funds held a stake in the company as of Q4 2025, an increase from 37 at the end of the prior quarter, suggesting growing institutional interest in the stock.

ATRO remains on analysts’ radar and has a Strong Buy rating, with an average share price upside potential of 32% as of the close of business on April 10.

Last month, Astronics Corporation was chosen by Boeing to provide fuel tank access doors for the 737 MAX, building on a long-lasting partnership with the aircraft manufacturer across several platforms. Production work on the agreement will take place in Clackamas, Oregon, where the company has manufactured a broad range of technical products over the years.

In other news, the company posted a strong end to 2025 with fourth-quarter revenue increasing 15.1% year-over-year to $240.1 million. Consolidated net income per share came in at $0.78, improving from a net loss of $0.08 per share in the prior year. Astronics ended the year with a record backlog of $674.5 million.

Astronics Corporation provides advanced technologies to global aerospace, defense, and electronics clients. Some of its offerings include lighting and safety systems, aircraft electronics integration, automated test systems, and distribution and motion systems, among other products and services.

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