The defense industry is an extremely lucrative sector that is thriving as countries ramp up their military spending amid the changing geopolitical situation. The United States tops the list of the world’s biggest military spenders with a military budget of $940 billion. China, India and Russia are some of the other notable companies that spend a fortune every year on defense.
Major countries hire defense contractors for military equipment, services and maintenance of their defense systems. The U.S. Department of Defense has contracts worth billions of dollars with organizations from around the world. The prime contractors of the U.S. Department of Defense include The Boeing Company (NYSE: BA), Northrop Grumman Corporation (NYSE: NOC), and Huntington Ingalls Industries, Inc. (NYSE: HII).
The defense industry has seen a significant growth in terms of the revenues generated by top defense contractors in the world. The military spending value globally has steadily grown in the last few years and has reached $1.92 trillion, as of 2019. According to Deloitte, the rising geopolitical tensions among the U.S. and its allies with China, Russia, Iran, and other countries will definitely cause a rise in military spending over the coming years. As a result, the defense contractors industry is expected to have a 2.8% increase worldwide, crossing the $2 trillion mark in terms of revenues generated by defense companies.
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Our Methodology
Following is the list of top defense contractors in 2021. This ranking is mainly based on the amount received by each company in terms of their defense contracts from the Department of Defense in the fiscal year 2020.
Top Defense Contractors in 2021
15. Bechtel Corporation
Number of Hedge Fund Holders: N/A
The defense contract of Bechtel Corp. (BPR) with the U.S. Department of Defense is worth $1.691 billion. Bechtel mainly works in the infrastructure, environmental cleanup, energy, mining and metals, management, and petrochemicals industries. However, the defense and nuclear security department of the company is particularly the one that has this contract with the DOD. Bechtel is providing secure computer-based operational systems, services like engineering and maintaining high-security locations like the U.S. Uranium Processing Facility to the DOD.
The goal of the company is to continually innovate and modernize U.S. defense capabilities. Bechtel is also working with several U.S. allies and is assisting them with similar projects. The company ranks 15th in the list of top defense contractors in 2021.
14. Booz Allen Hamilton Holding Corporation (NYSE: BAH)
Number of Hedge Fund Holders: 29
The Booz Allen Hamilton Holding Corp. (NYSE: BAH) has a $2.287 billion defense contract with the U.S. Department of Defense. It is an I.T. and management company that started in 1914. One of its most formative and notable achievements the company took place in 1940, when the U.S. government contracted it to help in doubling the size of its Navy fleet.
Like The General Electric Company (NYSE: G.E.), The Boeing Company, Northrop Grumman Corporation and Huntington Ingalls Industries, Inc., Booz Allen Hamilton is one of the top defense contractors in the world.
It also provides intelligence, transportation, commercial, health, energy, law enforcement, service services through consultation, engineering, analytics, cybersecurity, and digital services and products to DOD all over the world. The company ranks 14th in the list of top defense contractors in 2021.
13. Science Applications International Corporation (NYSE: SAIC)
Number of Hedge Fund Holders: 18
The Science Applications International Corporation (NYSE: SAIC) has a $2.383 billion defense contract with the U.S. Department of Defense. It is a spin-off from the original SAIC, which is now known as Leidos. The company serves the defense, civilian, space, and intelligence markets. The majority of its business mainly comes from government contracts, but it also has civilian customers or non-defense customers like NASA, the State Department, and the Environmental Protection Agency EPA.
The company ranks 13th in the list of top defense contractors in 2021.
12. Oshkosh Corporation (NYSE: OSK)
Number of Hedge Fund Holders: 26
Oshkosh Corporation (NYSE: OSK) has a $2.498 billion defense contract with the U.S. Department of Defense. It is not related to the children’s clothing company Oshkosh B’Gosh, as it only makes specialty trucks and access equipment for DOD. It started in 1917 as Oshkosh Truck, but it diversified its portfolio, and now it has commercial brands like JLG, Jerry-Dan, Oshkosh Airport Products, Pierce, Frontline Communications, McNeilus, and IMT. The defense division of the company produces tactical vehicles and parts and services for those vehicles as well.
11. Leidos Holdings, Inc. (NYSE: LDOS)
Number of Hedge Fund Holders: 18
Leidos Holdings, Inc. (NYSE: LDOS) has a $3.043 billion defense contract with the U.S. Department of Defense. Currently, the company has 38,000 employees working in the aviation, defense, intelligence, energy, healthcare, physical science, surface, and space transportation departments of the company. While many other contractors focus more on building products to sell, Leidos’ main focus is on research and development. The first contract of the company was in 1969 with DOD for analyzing the nuclear weapon effects of the U.S. government.
The company ranks 11th in the list of top defense contractors in 2021.
10. Atlantic Diving Supply, Inc.
Number of Hedge Fund Holders: N/A
Atlantic Diving Supply, Inc. (ADS) has a $3.091 billion defense contract with the U.S. Department of Defense. ADS serves through the development of equipment and systems such as weapons, medical equipment, personal protective equipment, systems and strategies, robotics, research, and diving equipment for the DOD and other customers. The company ranks 10th in the list of top defense contractors in 2021.
Like The General Electric Company, The Boeing Company, Northrop Grumman Corporation and Huntington Ingalls Industries, Inc., Atlantic Diving is one of the top defense contractors in the world.
9. General Electric Company (NYSE: GE)
Number of Hedge Fund Holders: 68
The General Electric Company has a $4.378 billion defense contract with the U.S. Department of Defense. G.E. has expanded its portfolio to industries like aviation, power, healthcare, and renewable energy. G.E. defense contracts are mainly linked with its aviation sector, including projects like the development of the turbofan fighter aircraft engines and gas turbines for the Navy frigates. GE is also the supplier of engines to other companies like Lockheed Martin and serves many commercial customers as well.
In its Q1 2021 investor letter, Longleaf Partners Fund highlighted a few stocks and General Electric Co (NYSE:GE) is one of them. Here is what the fund said:
“General Electric (GE) (22%, 1.50%), the revitalized Aviation, Healthcare and Power conglomerate, was a top contributor following on its strong 4Q 2020 performance. Fourth-quarter Healthcare results were excellent, with revenues up 6% year-over-year (YoY), operating margins up 3% to 20% and strong FCF conversion. The Power and Renewables segment improved margins due to strength from gas plant services. With flight traffic increasing, Aviation appears likely to begin a multi-year recovery in the second half of this year. GE also swapped its aircraft leasing operations to AerCap for a 46% stake in the combined company, intelligently wrapping up its previously troubled GE Capital financing operations and further decreasing overall leverage. We continue to be impressed by the turnaround work of CEO Larry Culp, and the stock remains discounted against the quality of the three core business segments.”
8. L3Harris Technologies, Inc. (NYSE: LHX)
Number of Hedge Fund Holders: 41
L3Harris Technologies, Inc. (NYSE: LHX) has a $6.272 billion defense contract with the U.S. Department of Defense. The company is known as the technology company working to fulfill the defense needs of all kinds, whether it is for the air, land, sea, space, or cyberspace defense needs. It is one of the largest defense contracting organizations, with approximately 48,000 employees serving in 100 countries. It specializes in surveillance, electronic warfare, microwave weaponry, I.T. services, and communications equipment services and systems. The company serves both defense and commercial customers.
The company ranks 8th in the list of top defense contractors in 2021. Like The General Electric Company, The Boeing Company, Northrop Grumman Corporation and Huntington Ingalls Industries, Inc., L3Harris Technologies, Inc. is one of the top defense contractors in the world.
Artisan Mid Cap Fund, in its Q4 2020 investor letter, mentioned L3Harris Technologies, Inc.. Here is what Artisan Mid Cap Fund has to say about L3Harris Technologies, Inc. in its letter:
“We also exited our position in L3Harris Technologies. L3Harris’ recent quarterly results showed some pandemic-related impact on the company’s business, though relative to other industrials stocks, the effect has been quite modest, and it is achieving ahead-of-schedule synergies from its recent merger. However, concerns about ballooning federal deficits and potential associated defense-budget cuts have been a headwind. We share these concerns, and with the company’s market cap above the mid-cap range, we concluded our campaign to fund newer profit cycle opportunities.”
7. BAE Systems plc (OTC: BAESY)
Number of Hedge Fund Holders: N/A
BAE Systems plc (LSE: BA.L) has a $6.499 billion defense contract with the U.S. Department of Defense. It is a British company that also has a U.S. subsidiary, which is headquartered in Virginia. The company has about 35,000 employees worldwide who provide products and services for both commercial and military customers. The company mainly works with intelligence systems, specialized security, electronic systems, armored combat vehicles, protection products, munitions, and artillery systems.
6. Huntington Ingalls Industries, Inc. (NYSE: HII)
Number of Hedge Fund Holders: 20
Huntington Ingalls Industries, Inc. has a $7.710 billion defense contract with the U.S. Department of Defense. Since the detachment of the company from Northrop Grumman in 2011, Huntington Ingalls Industries, Inc. has built approximately over 70% of the U.S. Navy’s fleet and all the aircraft carriers, making it the country’s largest military shipbuilding company. The company ranks 6th in the list of top defense contractors in 2021.
Like The General Electric Company, The Boeing Company, Northrop Grumman Corporation and L3Harris Technologies, Inc., Huntington Ingalls Industries, Inc. is one of the top defense contractors in the world.
5. Northrop Grumman Corporation (NYSE: NOC)
Number of Hedge Fund Holders: 40
The company Northrop Grumman Corporation 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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