This article looks at the 8 Best Mid Cap Defense Stocks to Buy.
The NYSE Arca Defense Index is up 4.96% year-to-date as of the close on June 24, trailing the S&P 500’s returns of 7.29% during the period. The defense sector has been volatile in 2026 due to a mix of geopolitical uncertainty, profit-taking, and weak earnings, among other factors.
Earlier in the month, Bernstein noted the sharp decline in share prices of major defense contractors since the beginning of the Iran war and stated the firm does not anticipate a recovery until at least the midterm elections in November.
Analyst Douglas Harned said that most of these stocks were trading near record-high valuations at the onset of the war, leaving them exposed as investors shifted toward industries offering faster revenue growth.
In May, Citigroup told investors in a research note that the defense sector was struggling due to a combination of weak earnings and fears of AI disruption.
In other news, President Trump on Wednesday hosted defense CEOs at the White House as the administration seeks to increase weapons production to replenish vital defense systems and reassure America’s allies that the country’s industrial base can meet soaring global demand for military equipment.
On the same day, the White House requested Congress for $87.6 billion in supplemental spending for the Iran war and other unrelated programs, such as Ebola response and support for American farmers.
With that said, let’s now shift focus and discuss the best mid cap defense stocks to buy.
Photo by Cibi Chakravarthi on Unsplash
Methodology
We used screeners to identify mid-cap defense stocks that trade on American exchanges as of the close on June 24. From there, we selected the top 8 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 Q1 2026. 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. Insider Monkey’s quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 599.2% since May 2014, beating its benchmark by 372 percentage points (see more details here).
8 Best Mid Cap Defense Stocks to Buy:
8. Ducommun Incorporated (NYSE:DCO)
Number of Hedge Fund Holders: 18
Ducommun Incorporated (NYSE:DCO) is among the 8 Best Mid Cap Defense Stocks to Buy, with 18 hedge funds having a stake in the company, according to Insider Monkey’s database as of Q1 2026.
Wall Street has a bullish outlook on the stock with a Strong Buy rating. However, analysts anticipate a 1% downside to its share price as of the close on June 24.
Recent updates include Truist, which on May 26 lifted the price target on Ducommun Incorporated to $150 from $136 and maintained a Buy rating. The adjustment came after the company’s first-quarter earnings beat.
This followed Citigroup’s revision on May 18 when the firm raised its price target on the stock to $167 from $141 and reiterated a Buy rating after updating its model for companies in the aerospace and defense industry.
Ducommun Incorporated reported robust results for Q1 2026, with net revenue increasing 9% from the prior year to $209 million. Gross margin grew by 70 bps year-over-year to 26.9%. Adjusted net income came in at $0.75 per share, improving from $0.23 per share in Q1 2025.
Ducommun Incorporated provides manufacturing solutions to customers in the global aerospace, defense, military, space, and industrial markets, with its core expertise in Electronic Systems and Structural Systems. The company’s shares have surged by over 70% this year.
7. Loar Holdings Inc. (NYSE:LOAR)
Number of Hedge Fund Holders: 25
Loar Holdings Inc. (NYSE:LOAR) is among the 8 Best Mid Cap Defense Stocks to Buy. According to Insider Monkey’s database for Q1 2026, 25 hedge funds hold a stake in the company.
The stock has returned 8.53% so far this year. Wall Street remains bullish, with a Strong Buy rating and a one-year average share price target of $79.25, representing 7% upside as of the close on June 24.
Recent updates include Citigroup analyst John Godyn, who on May 15 reiterated the firm’s Buy rating on Loar Holdings Inc. with a price target of $71, according to TipRanks.
Earlier on May 8, RBC Capital trimmed its price target on the stock to $80 from $90 following the first-quarter earnings report. However, the firm reiterated an Outperform rating on the shares.
In a research note to investors, RBC Capital’s analyst Kenneth Herbert noted the significant net sales growth during the quarter, while adding that the management was so far not seeing any impact from the Iran war.
The company reported net sales of $156.1 million in Q1, up 36.1% year-over-year, while representing an organic increase of 11.4%. Adjusted EBITDA came in at $63.2 million, growing 46.6% from the prior year. Adjusted EPS stood at $0.34, improving from $0.28 during the same period last 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.
6. Redwire Corporation (NYSE:RDW)
Number of Hedge Fund Holders: 32
Redwire Corporation (NYSE:RDW) is among the 8 Best Mid Cap Defense Stocks to Buy. The company showcased its upgraded Octopus E140 MWIR Electro-Optical/Infrared (EO/IR) aircraft payload during the Eurosatory event between June 15-19, 2026.
The next-generation gyrostabilized aircraft payload is known for providing advanced intelligence, surveillance, and reconnaissance capabilities, along with impressive image stability.
The E140 MWIR is built for operating in challenging environments without compromising on the effectiveness of the operation. The system combines Mid-Wave Infrared (MWIR) sensing with HD electro-optical (EO) imaging and robust onboard processing.
According to Redwire Corporation’s press release, key capabilities include clear and stable imagery at stand-off distances, flawless performance during both day and night, high-quality zoom performance, integrated GPS/INS, advanced onboard processing, and more.
The stock remains on analysts’ radar and sports a Moderate Buy rating, with an average upside potential of 55% as of the close on June 24.
Interest from institutional investors in the stock continues to grow. According to Insider Monkey’s database for Q1 2026, 32 hedge funds held a stake in the company, up from 28 at the end of Q4 2025.
Redwire Corporation is a global space and defense technology company that leverages artificial intelligence and digital engineering to deliver advanced technologies related to autonomous systems, aerospace infrastructure, and multi-domain operations.
5. Mercury Systems, Inc. (NASDAQ:MRCY)
Number of Hedge Fund Holders: 32
Mercury Systems, Inc. (NASDAQ:MRCY) is among the 8 Best Mid Cap Defense Stocks to Buy, with 32 hedge funds holding a stake in the company as per Insider Monkey’s database for Q1 2026.
Shares have surged 44% year-to-date as of the close on June 24, making it one of the best-performing defense stocks so far in 2026. However, that appears to have limited its upside potential as Wall Street analysts have a Moderate Buy rating on MRCY and see a downside of 6%.
Recent updates include William Blair analyst Jonathan Ho, who on June 5 reiterated the firm’s Buy rating, according to a report on TipRanks.
Earlier on June 1, Jefferies lifted its price target on Mercury Systems, Inc. to $105 from $95 and maintained a Hold rating. The adjustment came after the firm’s meeting with senior company leaders.
Jefferies noted record bookings in recent quarters and expects Mercury’s gross margins to improve as low-margin backlog rolls off. Moreover, the firm anticipates growth opportunities ahead from rising budgets and the Golden Domes project.
The aerospace and defense technology company reported robust results for the third quarter of fiscal 2026, with revenue organically increasing 11.5% year-over-year to $236 million. Adjusted EPS came in at 27 cents, up from 6 cents during the same quarter last year. It ended the quarter with a record backlog of $1.6 billion, up 17.9% from the prior year.
Mercury Systems, Inc. provides mission-critical processing that enhances the accessibility of advanced technologies for complex aerospace and defense missions.
4. V2X, Inc. (NYSE:VVX)
Number of Hedge Fund Holders: 34
V2X, Inc. (NYSE:VVX) is among the 8 Best Mid Cap Defense Stocks to Buy. As of the close of business on June 24, the stock is a Moderate Buy based on the recommendations from 10 analysts and has an average share price upside potential of 8%.
Recent updates include Raymond James, which downgraded VVX to Market Perform from Outperform on Wednesday. The firm cited valuation concerns as the reason behind the adjustment.
In a research note to investors, the analyst noted the robust share price gains in 2026, while adding that there is limited potential for multiple expansion ahead. The firm believes the stock offers a balanced risk/reward at the moment. Raymond James further said that the revision was in no way tied to the company’s upcoming quarterly results.
Earlier on May 29, BofA lifted its price target on the stock to $93 from $78 and reiterated a Buy rating. The adjustment came following the company’s first-quarter earnings report.
According to TipRanks, a BofA analyst told investors that the results reflect V2X, Inc.’s (NYSE:VVX) ‘unique position to support operational tempo worldwide’. The firm further said that it was increasing estimates for the company and anticipates upside potential as military expenditure rises.
On the other hand, investors’ sentiment towards the stock remains steady. According to Insider Monkey’s database for Q1 2026, 34 hedge funds held a stake in the company, up from 33 in the prior quarter.
The company reported strong results for the first quarter of fiscal 2026, with revenue growing 23% year-over-year to $1.25 billion. Adjusted diluted earnings per share were posted at $1.53, up 55% from the previous year. Total backlog at the end of the quarter stood at a record $13.8 billion, helped by 50 awards amounting to $4.1 billion in Q1.
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.
3. AeroVironment, Inc. (NASDAQ:AVAV)
Number of Hedge Fund Holders: 37
AeroVironment, Inc. (NASDAQ:AVAV) is among the 8 Best Mid Cap Defense Stocks to Buy based on hedge fund sentiment. According to Insider Monkey’s database for Q1 2026, 37 hedge funds held a stake in the company.
On June 23, BTIG analyst Andre Madrid slashed the price target on the stock to $205 from $330, while maintaining a Buy rating.
The firm noted several reasons for the adjustment, including the Space Force’s termination of the contract covering the Satellite Communications Augmentation Resource (SCAR) program, a reduction in new contract awards, and lower margins for its Space, Cyber, and Directed Energy business.
Despite BTIG’s price target reduction, the overall sentiment around the stock remains bullish. As of the close of business on June 24, Wall Street has a Strong Buy rating on AeroVironment, Inc. with an average share price upside potential of 75%.
In other news, earlier this month, the global defense technology leader signed an MOU with Taiwan-based Ubiqconn Technology Inc. to collaborate on developing a common controller ecosystem to support the modernization of the country’s defense systems and indigenous unmanned aircraft systems program.
AeroVironment, Inc. designs and manufactures unmanned aerial vehicles, ground robotic systems, and loitering munitions.
2. Astronics Corporation (NASDAQ:ATRO)
Number of Hedge Fund Holders: 42
Astronics Corporation (NASDAQ:ATRO) is among the 8 Best Mid Cap Defense Stocks to Buy. As of the close of business on June 24, the stock is a Strong Buy with an average share price upside potential of 21%.
On May 28, TD Cowen analyst Gautam Khanna lifted the firm’s price target on the stock to $100 from $85 and maintained a Buy rating. The adjustment came after the company was awarded a long-awaited order from the Army for the TS-4549/T Radio Test Sets Program.
A day earlier, Astronics Corporation announced that Astronics Test Systems had received a purchase order from the Army for the program. The order will cover deliveries over the next 20 months and is valued at $44.7 million.
Through this order, a full-rate production stage of the TS-4549/T Radio Test Sets Program has been initiated. The company had originally received an IDIQ contract for the program back in June 2024. It was funded at $215 million, of which $145 million now remains.
Last month, the company reported robust results for the first quarter of 2026, with sales growing 12% year-over-year to $230.6 million. Net income per diluted share was logged at $0.67, improving from $0.26 in the prior year’s period. Moreover, Astronics ended the quarter with a record backlog of $734.3 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.
1. Karman Holdings Inc. (NYSE:KRMN)
Number of Hedge Fund Holders: 43
Karman Holdings Inc. (NYSE:KRMN) is among the 8 Best Mid Cap Defense Stocks to Buy. Institutional investors’ interest in the stock continues to grow. According to Insider Monkey’s database for Q1 2026, 43 hedge funds held a stake in the company, up from 36 at the end of the fourth quarter of 2025.
Wall Street also remains bullish with a Strong Buy rating and an average share price upside potential of 120%, as of the close of business on June 24.
Recent updates include RBC Capital, which reiterated its Outperform rating and $100 price target on June 1. The adjustment came after the company provided an operational data update tied to its second offering and stated that its active pipeline had tripled from the end of Q1 2025 to approximately $3 billion as of May 25, 2026.
Karman Holdings Inc. further added that the pipeline could yield more than half of the opportunity in defense program contracts related to hypersonics & strategic missiles, tactical missiles & integrated defense, maritime security, and space and launch initiatives.
In other news, the company reported record quarterly revenue of $151.2 million in Q1, representing a 51% year-over-year increase. Earnings per fully diluted share came in at $0.06, improving from a loss of $0.04 during the same period last year. Backlog grew 61% from the prior year to finish the quarter at $1 billion.
Following the results, management raised its revenue outlook to $720 to $735 million and its adjusted EBITDA outlook to $208.5 to $219.5 million.
Karman Holdings Inc. is engaged in the design and development of vital system solutions for missile defense, satellite, spacecraft, launch vehicles, hypersonic, and unmanned aerial systems.
