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Goldman Sachs Defense Stocks: Top 10 Stock Picks

In this article, we discuss the top 10 Goldman Sachs defense stocks. If you want to skip our detailed discussion on the defense sector, head directly to Goldman Sachs Defense Stocks: Top 5 Stock Picks

The worldwide aerospace and defense industry expanded from $795.92 billion in 2022 to $855.62 billion in 2023, representing a compound annual growth rate (CAGR) of 7.5%. The aerospace and defense market is projected to reach $1076.56 billion by 2027, indicating a CAGR of 5.9%. PwC’s analysis indicated that in 2022, the aerospace and defense sector generated $741 billion in revenue, marking a modest 3% increase compared to the previous year. Simultaneously, the industry achieved $67 billion in operating profit, reflecting an 8% rise. However, the revenue growth was less than anticipated due to the industry’s struggle to meet soaring market demand, hindered by production constraints stemming from supply chain and labor issues.

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In 2023, aerospace and defense organizations may encounter significant challenges primarily related to supply chain disruptions and talent shortages as well. Additionally, the aerospace and defense sector is sensitive to jet fuel prices, as they affect ticket prices and, subsequently, passenger travel demand. A sudden and sustained increase in jet fuel prices can disrupt traffic and introduce market volatility. To tackle these challenges, aircraft manufacturers are investing in the development of more fuel-efficient aircraft and engines to reduce operating costs. They are also exploring the creation of lower and zero-emission commercial aircraft for the future. According to Deloitte’s outlook survey, 88% of senior executives surveyed expressed an optimistic outlook for the aerospace and defense industry in the coming year, ranging from somewhat positive to very positive. Several factors contribute to this optimism, including advancements in new technologies and sectors like advanced air mobility, evolving business models in areas such as space exploration, and the adoption of digital thread and smart factory practices. Aerospace and defense companies that prioritize innovation and are prepared to seize emerging opportunities are likely to outperform their peers in 2023, as per Deloitte. 

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Despite facing temporary operational challenges, FitchRatings maintains a positive outlook for the global Aerospace & Defense sector in 2023. The industry is expected to maintain positive free cash flow generation and improved financial flexibility throughout the year, which should help mitigate short-term issues such as a decrease in aircraft deliveries. The robust demand for air travel and the aging aircraft fleets underline the necessity for new deliveries, exemplified by the combined backlog of Boeing and Airbus, which exceeds $700 billion or comprises more than 12,000 aircraft over multiple years. FitchRatings’ initial projection for 2023 commercial aircraft deliveries by Airbus and Boeing, which started the year at a 20% growth rate, has been adjusted downward to a low-teens growth rate. This revision is primarily driven by ongoing supply chain challenges, especially at Airbus. The new forecast anticipates more than 1,250 aircraft deliveries in 2023 compared to 1,140 in 2022, with Boeing contributing the majority of this growth.

See Also: Goldman Sachs EV and Battery Stocks: Top 10 Stock Picks

To benefit from the growth potential in the defense industry, the Goldman Sachs portfolio holds stocks including Lockheed Martin Corporation (NYSE:LMT), RTX Corporation (NYSE:RTX), and The Boeing Company (NYSE:BA). 

Our Methodology 

We used Goldman Sachs’ Q2 2023 portfolio and selected the 10 biggest positions in defense firms during the quarter for this list. We have mentioned Goldman Sachs’ stake value and the hedge fund sentiment towards each stock as of the second quarter of 2023. The list is ranked in the ascending order of the firm’s stake value in each holding. 

Photo by Somchai Kongkamsri from Pexels

Goldman Sachs Defense Stocks: Top Stock Picks

10. Textron Inc. (NYSE:TXT)

Goldman Sachs’ Stake Value: $116,607,175

Number of Hedge Fund Holders: 28

Textron Inc. (NYSE:TXT) conducts its operations globally across several sectors, including aircraft, defense, industrial, and finance. The company’s activities are divided into six segments – Textron Aviation, Bell, Textron Systems, Industrial, Textron eAviation, and Finance. On August 7, Textron Inc. (NYSE:TXT) was granted a contract worth approximately $241.37 million by the U.S. Navy. This contract is for the procurement of materials and non-recurring activities related to five Ship to Shore Connector Landing Craft Air Cushion 100 Class. The project is scheduled to be finished by October 2025.

Securities filings for the second quarter of 2023 reveal that Goldman Sachs held 1.72 million shares of Textron Inc. (NYSE:TXT) worth $116.60 million. 

According to Insider Monkey’s second quarter database, 28 hedge funds were bullish on Textron Inc. (NYSE:TXT), compared to 25 funds in the preceding quarter. Cliff Asness’ AQR Capital Management is the largest stakeholder of the company, with 1.78 million shares worth $120.6 million. 

In addition to Lockheed Martin Corporation (NYSE:LMT), RTX Corporation (NYSE:RTX), and The Boeing Company (NYSE:BA), Textron Inc. (NYSE:TXT) is one of the best Goldman Sachs defense stocks. 

9. TransDigm Group Incorporated (NYSE:TDG)

Goldman Sachs’ Stake Value: $141,507,189

Number of Hedge Fund Holders: 67

TransDigm Group Incorporated (NYSE:TDG) engages in the design, manufacturing, and distribution of aircraft parts worldwide. The company’s operations are divided into three segments – Power & Control, Airframe, and Non-aviation. TransDigm Group Incorporated (NYSE:TDG) caters to a wide range of customers, including suppliers of engine and power system components, airlines, third-party maintenance providers, military procurement agencies, and repair facilities. It is one of the top Goldman Sachs defense stocks. In Q2 2023, Goldman Sachs owned a $141.5 million position in TransDigm Group Incorporated (NYSE:TDG). 

On August 8, TransDigm Group Incorporated (NYSE:TDG) reported financial results for the quarter ended July 1, 2023. The company announced a non-GAAP EPS of $7.25 and a revenue of $1.74 billion, outperforming Wall Street estimates by $0.85 and $55.16 million. 

According to Insider Monkey’s second quarter database, 67 hedge funds were bullish on TransDigm Group Incorporated (NYSE:TDG), same as the prior quarter. Mark Massey’s AltaRock Partners is the leading stakeholder of the company, with 1.35 million shares worth $1.2 billion. 

Baron Small Cap Fund made the following comment about TransDigm Group Incorporated (NYSE:TDG) in its second quarter 2023 investor letter:

“We have had some extraordinary winners over time. For instance, we bought DexCom, Inc. at a $950 million market cap in 2012, and it is now valued at $50 billion (the stock has appreciated 41% annually since the Fund’s initial purchase). TransDigm Group Incorporated (NYSE:TDG) has grown from $1.1 billion at purchase to $49 billion presently (and the stock has appreciated 29% annually since the Fund’s initial purchase 17 years ago). IDEXX Laboratories, Inc. has gone from $2 billion at purchase to $42 billion over almost 15 years and the stock has appreciated 26% annually during that time frame. The Trade Desk is now valued at $38 billion and was $433 million when we first purchased shares over 6 years ago. The stock has appreciated almost 60% annually since our initial purchase. Pretty amazing. All four stocks have been solid performers this year, contributing nicely to the Fund’s returns.

Since we run a small-cap fund but want to hold on to these great investments as they continue to compound and perform, we reduce the positions sizes over the holding period so that the overall market capitalization of the Fund is palatable. For each of the four stocks mentioned above, we presently own 11% or less of our peak positions. We take the proceeds from the trimming of these positions to fund new small-cap investments, with the hopes of somehow replicating these results.”

8. Howmet Aerospace Inc. (NYSE:HWM)

Goldman Sachs’ Stake Value: $155,037,691

Number of Hedge Fund Holders: 49

Howmet Aerospace Inc. (NYSE:HWM) offers advanced engineered solutions for the aerospace and transportation sectors globally. The company operates through four segments – Engine Products, Fastening Systems, Engineered Structures, and Forged Wheels. The Engineered Structures segment specializes in providing products and services such as titanium ingots, aluminum and nickel forgings, machined components, and assemblies for aerospace and defense applications. Howmet Aerospace Inc. (NYSE:HWM) is one of the top Goldman Sachs defense stocks, with the firm holding a $155 million position in the company as of Q2 2023. 

On August 1, Howmet Aerospace Inc. (NYSE:HWM) reported a Q2 non-GAAP EPS of $0.44 and a revenue of $1.65 billion, outperforming Wall Street estimates by $0.01 and $40 million, respectively. The company ended the second quarter with a cash balance of $536 million.

According to Insider Monkey’s second quarter database, 49 hedge funds were long Howmet Aerospace Inc. (NYSE:HWM), compared to 42 funds in the prior quarter. Paul Singer’s Elliott Management is the largest stakeholder of the company, with 17 million shares worth $847.2 million. 

Oakmark Equity and Income Fund made the following comment about Howmet Aerospace Inc. (NYSE:HWM) in its Q1 2023 investor letter:

“During the quarter, we eliminated three positions: Howmet Aerospace Inc. (NYSE:HWM), Keurig Dr Pepper and LivaNova. Howmet performed well and reached our sell target. This is our second successful investment with CEO John Plant, whom we rank among the top CEOs.”

7. L3Harris Technologies, Inc. (NYSE:LHX)

Goldman Sachs’ Stake Value: $186,559,116

Number of Hedge Fund Holders: 35

L3Harris Technologies, Inc. (NYSE:LHX) is an aerospace and defense technology firm that delivers commercial solutions for governmental and commercial clients worldwide. On August 31, L3Harris Technologies, Inc. (NYSE:LHX) declared a $1.14 per share quarterly dividend, in line with previous. The dividend is distributable on September 19, to shareholders of record on September 5. 

L3Harris Technologies, Inc. (NYSE:LHX) is one of the top Goldman Sachs defense stocks. Goldman Sachs owned 952,950 shares of L3Harris Technologies, Inc. (NYSE:LHX) worth $186.5 million during the second quarter of 2023. 

According to Insider Monkey’s second quarter database, 35 hedge funds were bullish on L3Harris Technologies, Inc. (NYSE:LHX), compared to 46 funds in the preceding quarter. Dmitry Balyasny’s Balyasny Asset Management is the leading position holder in the company, with 1.27 million shares worth $250.5 million.  

6. Northrop Grumman Corporation (NYSE:NOC)

Goldman Sachs’ Stake Value: $273,998,676

Number of Hedge Fund Holders: 40

Northrop Grumman Corporation (NYSE:NOC) functions as a global aerospace and defense company. Its operations are divided into Aeronautics Systems, Defense Systems, Mission Systems, and Space Systems segments. At the conclusion of the second quarter of 2023, Goldman Sachs held 601,138 shares of Northrop Grumman Corporation (NYSE:NOC) worth approximately $274 million. 

On August 16, Northrop Grumman Corporation (NYSE:NOC) declared a quarterly dividend of $1.87 per share, in line with previous. The dividend is payable on September 13, to shareholders of record on August 28. 

According to Insider Monkey’s second quarter database, 40 hedge funds were bullish on Northrop Grumman Corporation (NYSE:NOC), compared to 45 funds in the prior quarter. Donald Yacktman’s Yacktman Asset Management is a prominent stakeholder of the company, with 409,839 shares worth $186.80 million.  

Like Lockheed Martin Corporation (NYSE:LMT), RTX Corporation (NYSE:RTX), and The Boeing Company (NYSE:BA), Northrop Grumman Corporation (NYSE:NOC) is one of the top Goldman Sachs defense stocks. 

Harding Loevner Global Equity Strategy made the following comment about Northrop Grumman Corporation (NYSE:NOC) in its Q1 2023 investor letter:

“Our other purchase was Northrop Grumman Corporation (NYSE:NOC), a US defense contractor whose stock price experienced a pullback. We like that Northrop has a larger presence than its rivals in the most favorable subcategories of the defense industry-namely, nuclear weapons, space systems, and what’s known as C4ISR (which stands for Command, Control, Communications, Computers. Intelligence, Surveillance, and Reconnaissance). C4ISR refers to digital systems that translate data picked up from different sensors-such as an incoming hypersonic missile or advancing troops-into a common format, and then escalate key information to the right people These differentiated technologies are especially relevant in a time of increased geopolitical tensions. Northrop also benefits from large barriers to entry in this stable industry, which should enable continued strong earnings and cash flow.”

Click to continue reading and see Goldman Sachs Defense Stocks: Top 5 Stock Picks

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Disclosure: None. Goldman Sachs Defense Stocks: Top 10 Stock Picks is originally published on Insider Monkey.

The $250 Trillion AI Hype is Real. A few years from now, you’ll probably wish you’d bought this stock.

When Jeff Bezos said that one breakthrough technology would shape Amazon’s destiny, even Wall Street’s biggest analysts were caught off guard.

Fast forward a year and Amazon’s new CEO Andy Jassy described generative AI as a “once-in-a-lifetime” technology that is already being used across Amazon to reinvent customer experiences.

At the 8th Future Investment Initiative conference, Elon Musk predicted that by 2040 there would be at least 10 billion humanoid robots, with each priced between $20,000 and $25,000.

Do the math. According to Musk, this technology could be worth $250 trillion by 2040.

Put another way, that’s roughly equal to:

  • 175 Teslas
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  • 140 Metas
  • 84 Googles
  • 65 Microsofts
  • And 55 Nvidias

And here’s the wild part — this $250 trillion wave isn’t tied to one company, but to an entire ecosystem of AI innovators set to reshape the global economy.

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AI, Tariffs, Nuclear Power: One Undervalued Stock Connects ALL the Dots (Before It Explodes!)

Artificial intelligence is the greatest investment opportunity of our lifetime. The time to invest in groundbreaking AI is now, and this stock is a steal!

AI is eating the world—and the machines behind it are ravenous.

Each ChatGPT query, each model update, each robotic breakthrough consumes massive amounts of energy. In fact, AI is already pushing global power grids to the brink.

Wall Street is pouring hundreds of billions into artificial intelligence—training smarter chatbots, automating industries, and building the digital future. But there’s one urgent question few are asking:

Where will all of that energy come from?

AI is the most electricity-hungry technology ever invented. Each data center powering large language models like ChatGPT consumes as much energy as a small city. And it’s about to get worse.

Even Sam Altman, the founder of OpenAI, issued a stark warning:

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Elon Musk was even more blunt:

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