2017 was a great year for defense stocks, some of them rising as much as 30% by the end of December. The rally was fueled mainly by the heated exchange between the United States and North Korea, as well as President Trump’s plans to refresh a number of weapons systems currently employed by the US army. Although the tensions between US and North Korea have cooled down a bit, the US government’s pledge to spend more on defense could sustain a prolonged rally in shares of defense contractors. In his first State of the Union address, President Trump has reiterated his support for the military. “In confronting these dangers, we know that weakness is the surest path to conflict, and unmatched power is the surest means of our defense. For this reason, I am asking the Congress to end the dangerous defense sequester and fully fund our great military,” Trump said.
At Insider Monkey, whenever we analyze a stock, we like to take into consideration the actions of billionaire fund managers. So, let’s see which are the top 6 defense stocks that billionaires are betting on.
First up is Leidos Holdings, Inc. (NYSE:LDOS), a provider of technology and engineering solutions in the defense, intelligence and other markets. At the end of the 2017 third quarter, 6 of the billionaires followed by Insider Monkey were holding the stock in their equity portfolios, up from 4 registered a quarter before. Ken Griffin led the way, with his fund, Citadel Investment Group, having reported ownership of 1.18 million Leidos shares in its latest 13F filing. Jim Simons’ Renaissance Technologies was also betting big on Leidos Holdings, Inc. (NYSE:LDOS), as the fund’s stake was boosted by 21% to 1.04 million shares by the end of September.
In the beginning of January, Leidos Holdings, Inc. (NYSE:LDOS) was awarded a $47 million contract by the Air Force Research Laboratory to provide sensor technology for the EO-CHIL program. Later on, Leidos announced it would compete for work under a $250 million multiple-award, blanket purchase agreement offered by the General Services Administration for the provision of information technology, operation and maintenance services. Leidos is one of the seven companies eligible to compete for tasks under this program.
Ken Griffin’s Citadel Investment Group was also very bullish on Textron Inc. (NYSE:TXT), as it doubled its holding of the stock during the third quarter, amassing 2.77 million shares. Billionaire Mario Gabelli’s GAMCO Investors also held a sizable position in Textron, having reported ownership of 2.15 million shares in its latest quarterly filing. Overall, 7 billionaire fund managers were invested in Textron Inc. (NYSE:TXT) at the end of the 2017 third quarter.
Morgan Stanley has recently upgraded Textron Inc. (NYSE:TXT) from Underweight to Equal-weight and has increased its price target form $55 to $60. This comes despite the fact that Textron’s recent financial report was rather disappointing. The company reported a fourth-quarter adjusted earnings of $0.74 per share on the back of $4.02 billion in revenue, missing Wall Street’s forecasts of $4.04 billion in revenue and $0.77 in earnings per share. Textron also issued bleak forward guidance, estimating 2018 full-year earnings to range between $2.95 and $3.15 per share and $14.6 billion in revenue.