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 (NYSE:DCO) 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 (NYSE:DCO) 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 (NYSE:DCO) 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. (NYSE:LOAR) 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. (NYSE:LOAR) 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 (NYSE:RDW)’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 (NYSE:RDW) 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.
While we acknowledge the potential of RDW to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than RDW and that has 100x upside potential, check out our report about the cheapest AI stock.
Click to continue reading and see the 5 Best Mid Cap Defense Stocks to Buy.
Disclosure: None. Follow Insider Monkey on Google News.
