In this article we discuss the top 5 defense contractors in 2021. If you want to read our detailed analysis of the security and defense industry, go directly to Top Defense Contractors in 2021.
5. Northrop Grumman Corporation (NYSE: NOC)
Number of Hedge Fund Holders: 40
The company Northrop Grumman Corporation (NYSE: NOC) has a $12.068 billion defense contract with the U.S. Department of Defense. The fields of expertise of the company include space, defense, aeronautics, and cyberspace. Even though the majority of the company’s business comes from the U.S., it also provides its services to 25 other countries like Japan, Australia, the United Kingdom, and South Korea. The company is known for its cutting-edge technology, mainly for defense purposes. The most notable products of the company include the X-47B unmanned aircraft, B-2 Spirit stealth bomber, and the Lunar Module.
Artisan Value Fund, in its Q4 2020 investor letter, mentioned Northrop Grumman Corporation (NYSE: NOC). Here is what Artisan Value Fund has to say about Northrop Grumman Corporation in its letter:
“New purchases include Northrop Grumman. Northrop Grumman is a leader in manned aircraft, unmanned aircraft, spacecraft and missile-defense systems. We initiated a position in November 2020, as we believe the name is trading at an undeserved discount, despite having the potential to accelerate revenue over the next 24 months. In 2020, Northrup signed a contract to work with the US Air Force on their Ground Based Strategic Deterrent (GBSD) and B21 bomber. We believe the company’s portfolio is well-positioned with a highly desirable space segment business, significant classified content and GBSD driving growth. While the market has been focused on a “blue wave” risk to the defense budget, the industry is typically driven by threat assessment rather than budget constraints. If budget cuts were ever to affect the US Army, that customer represents less than 10% of the company’s revenue. This reinforces our belief that Northrop is well-positioned for the future and trades at an attractive valuation.”
4. The Boeing Company (NYSE: BA)
Number of Hedge Fund Holders: 59
The Boeing Company (NYSE: B.A.) has a $21.708 billion defense contract with the U.S. Department of Defense. The company is best known for its commercial airplanes as it is the world’s largest aerospace company, but it also designs and manufactures rockets, telecommunications equipment, satellites, missiles, helicopters, and military planes.
3. General Dynamics Corporation (NYSE: GD)
Number of Hedge Fund Holders: 31
General Dynamics Corporation (NYSE: G.D.) has a $21.880 billion defense contract with the U.S. Department of Defense. In the year 1952, several companies merged and formed General Dynamics Corporation. The company developed the USS Nautilus, the world’s first nuclear-powered submarine. The company has over 100,000 employees and is working in almost every area of defense. The business divisions of the company are Marine Systems, Aerospace, Combat Systems, and other related technologies.
Oakmark Global Fund, in their Q1 2021 investor letter, mentioned General Dynamics Corporation (NYSE: GD). Here is what Oakmark Global Fund has to say about General Dynamics Corporation in its letter:
“The second new U.S. equity purchase was General Dynamics, a leading U.S. defense contractor and owner of the world’s premier business jet franchise (Gulfstream). We were able to purchase this high-quality and durable business at a meaningful discount to our estimate of its intrinsic value after a series of near-term concerns hurt its share price. Taking a longer term view, the company’s business jet franchise should benefit from a multi-year investment program in new, differentiated product. Also, its free cash flow conversion is set to improve materially and the company is poised to benefit from a highly visible ramp up in revenue related to next generation nuclear-powered submarines. As these positives come into clearer view, we expect sentiment to improve, along with the company’s share price.”
2. Raytheon Technologies Corporation (NYSE: RTX)
Number of Hedge Fund Holders: 58
Raytheon Technologies Corporation (NYSE: RTX) has a $26.489 billion defense contract with the U.S. Department of Defense.
Davis New York Venture Fund, in its Q4 2020 investor letter, mentioned Raytheon Technologies Corporation (NYSE: RTX). Here is what the fund has to say about Raytheon Technologies Corporation in its letter:
“In today’s uncertain economy, we believe we have found such businesses trading at bargain prices in two sectors: industrials and financials. In the industrial space, concerns about the impact of the economic downturn on short-term profitability led to a wave of selling in a select group of leaders with durable competitive advantages, long records of profitability and bright long-term prospects. Companies like Raytheon Technologies is a wonderful example of attractive investments in this sector.”
1. Lockheed Martin Corporation (NYSE: LMT)
Number of Hedge Fund Holders: 50
Lockheed Martin Corporation (NYSE: LMT) has a $74.913 billion defense contract with the U.S. Department of Defense. The company was founded in 1995 when Lockheed Corporation merged with the Martin Marietta Company.
In its Q4 2020 investor letter, RiverPark Advisors highlighted a few stocks and Lockheed Martin Corp (NYSE:LMT) is one of them. Here is what the fund said:
“Despite better-than-expected third quarter results, LMT shares were weak for the quarter as defense spending is expected to be flat for the coming year. With a record $150 billion backlog and almost 30% of its revenue coming from building F-35 aircraft with deliveries forecast to reach 180 per year in 4-5 years (3Q’s revenue upside was from the F-35), we believe LMT should grow at a higher rate than overall defense budget growth and Street expectations over the next several years. Further, strategic acquisitions (LMT acquired AJRD for $4 billion in late December), debt pay down, a 3% dividend yield, and continued share buybacks from $6 billion per year of free cash flow should lead to even greater shareholder returns.”
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