In this piece, we will take a look at the 13 best aerospace and defense stocks to invest in. If you want to skip our overview of the high technology aerospace and defense industry and how it's shaped the modern day world, you can take a look at the 5 Best Aerospace and Defense Stocks to Invest In.
If there's one thing that can be said with certainty, it's that the defense and aerospace industry is one of the most important in the world when it comes to shaping power politics. Global geopolitics, and as the late Henry Kissinger would describe, 'realpolitik' is based on the cold, hard reality of military superiority. Traditionally, this superiority came in the form of strength in numbers - a concept that still holds true today.
However, along with this, another concept that has borne the test of time is the use of technology for warfare. Whether it's the Mongols who relied on brutal cavalry tactics, or the Ottoman use of gunpowder that made it a 'gunpowder empire', technology has shaped warfare and global power dynamics.
These days, the dominant and only superpower (some would even say a hyperpower) is the United States of America. The U.S., if you're unaware, has the most powerful military in the world, fueled by the greatest number of aircraft carriers for any military and an air force whose aircraft number in the thousands. Safe to say, aerospace plays a crucial role in maintaining American global military superiority, and by effect, it also shapes the global world order.
Powering the U.S. military behemoth, which also has the biggest defense budget in the world, are aerospace and defense stocks. These stocks are firms that either directly engage in providing the U.S. military, through the Department of Defense, with their combat or combat support equipment, or those that provide essential and tertiary capabilities such as the defense stock Planet Labs PBC (NYSE:PL) and Maxar Technologies whose advanced satellites carry the ability to remotely image any site in the world and provide military planners with invaluable information to inform their tactical and strategic decisions.
Technology sits at the heart of competing when it comes to defense and aerospace stocks, and a technological edge is precisely the reason that the U.S. is at the top of the global power food chain. American jets are envied by dictators and monarchs all over the world, and no matter what their public statements against the U.S. are, it wouldn't be imprudent to assume that they would give an arm and a leg (and then some) to get a taste of what American defense and aerospace stocks have to offer.
So what exactly do they offer? Well, let's start with one of the most well known defense and aerospace stocks in the world, the Bethesda, Maryland based aerospace firm Lockheed Martin Corporation (NYSE:LMT). Lockheed, if you're unaware, makes and sells fighter aircraft. While it also has other divisions, such as a space segment that aims to develop a colony on the Moon complete with a nuclear reactor in partnership with the National Aerospace and Space Administration (NASA), Lockheed Martin's bread and butter are airplanes. The firm in its current form came into being in the late 1990s as the U.S. defense industry consolidated (more on that later). Lockheed merged with Martin Marietta in 1995, after it acquired General Dynamics - perhaps one of the most consequential defense and aerospace stocks in the world.
That's a tall claim. So what made Martin Marietta so special? Well, the firm bought General Dynamics in 1993 - a deal that also saw it acquire the rights to the General Dynamics F-16 Fighting Falcon. The F-16 is the most successful fighter aircraft in the world and is used by most of the world's leading air forces. Its success has defined modern day dog fighting - an art that bulky fighter jets such as the The Boeing Company (NYSE:BA)'s F-15 struggled with.
Lockheed has moved past dog fighting since then. For aerospace and defense stocks, the 21st century has been all about stealth. Lockheed's F-117 'Nighthawk' and the technologies used on it dominated the stealth debate for decades, and led to the development of the world's only operational fifth generation fighter aircraft, the F-22 'Raptor'. America's crown jewel, the Raptor is an air superiority fighter designed with the singular aim of ensuring that enemy fighters cannot contest the United States Air Force's control of an airspace.
So, as aerospace and defense stocks continue to make magic a reality, we decided to take a look at some top stocks. Among these, the notable ones are The Boeing Company (NYSE:BA), TransDigm Group Incorporated (NYSE:TDG), and RTX Corporation (NYSE:RTX).
13 Best Aerospace and Defense Stocks to Invest In
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Our Methodology
To make our list of the best aerospace and defense stocks, we ranked the 40 most valuable aerospace and defense stocks that trade in U.S. markets by the number of hedge funds that had bought their shares in Q3 2023. Out of these, the top stocks were chosen.
For these aerospace and defense stocks, we used hedge fund sentiment. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
Textron Inc. (NYSE:TXT) is a diversified aviation defense stock that sells crewed and uncrewed aircraft for military use. The firm has been doing well on the financial front as of late since it has beaten analyst EPS estimates in all four of its latest quarters.
By the end of last year's third quarter, 27 out of the 910 hedge funds profiled by Insider Monkey were Textron Inc. (NYSE:TXT)'s shareholders. Mario Gabelli's GAMCO Investors is the firm's biggest hedge fund shareholder through its $131 million investment.
Textron Inc. (NYSE:TXT) joins TransDigm Group Incorporated (NYSE:TDG), The Boeing Company (NYSE:BA), and RTX Corporation (NYSE:RTX) in our list of the best aerospace and defense stocks.
Woodward, Inc. (NASDAQ:WWD) is a backend aerospace firm that sells components that are used in military aircraft. The firm's latest financial report for its first quarter for fiscal year 2024 saw Woodward, Inc. (NASDAQ:WWD) post a strong 27% annual revenue growth that also led to the firm increasing its full year guidance.
As of Q3 2023 end, 30 out of the 910 hedge funds part of Insider Monkey's database had held a stake in the firm. Woodward, Inc. (NASDAQ:WWD)'s largest investor in our database is Boykin Curry's Eagle Capital Management as it owns $505 million worth of shares.
Curtiss-Wright Corporation (NYSE:CW) is a diversified defense stock that sells aircraft components, weapons systems, communications systems, and other associated products. One of the stronger rated stocks on our list, Curtiss-Wright Corporation (NYSE:CW)'s shares are rated Strong Buy on average and analysts have set an average share price target of $244.17.
Insider Monkey took a look at 910 hedge fund portfolios for last year's third quarter and found 30 Curtiss-Wright Corporation (NYSE:CW) investors. Robert Joseph Caruso's Select Equity Group owned the biggest stake that was worth $110 million.
Axon Enterprise, Inc. (NASDAQ:AXON) is an American firm that makes and sells tasers. The firm expanded its security portfolio in February 2024 as it acquired a firm that sells systems that enable data and video gathering.
During 2023's third quarter, out of the 910 hedge funds polled by Insider Monkey, 31 had invested in the company. The largest Axon Enterprise, Inc. (NASDAQ:AXON) hedge fund shareholder is Neil C. Bradsher's Broadwood Capital as it owns 760,061 shares that are worth $151 million.
Northrop Grumman Corporation (NYSE:NOC) is one of the biggest and most well known aerospace and defense stocks in the world. Its B-21 next generation stealth bomber is all the hype these days; however, the same aircraft scored Northrop Grumman Corporation (NYSE:NOC) a downgrade to Hold from Buy by RBC Capital in January 2024 on the back of rising costs. The share price target was cut to $450 from $515.
As last year's September quarter ended, 35 out of the 910 hedge funds part of Insider Monkey's database had held a stake in Northrop Grumman Corporation (NYSE:NOC). Dmitry Balyasny's Balyasny Asset Management was the firm's biggest shareholder through its $204 million stake.
General Dynamics Corporation (NYSE:GD) is a diversified defense company catering to the needs of the U.S. Army and the U.S. Navy. Its fourth quarter results presented a mixed picture as while General Dynamics Corporation (NYSE:GD) managed to beat analyst revenue estimates of $11.4 billion, it missed the EPS estimates of $3.68.
After digging through 910 hedge fund portfolios for their third quarter of 2023 investments, Insider Monkey found that 39 were the firm's investors. Tom Gayner's Markel Gayner Asset Management is General Dynamics Corporation (NYSE:GD)'s largest shareholder in our database as it owns $101 million worth of shares.
L3Harris Technologies, Inc. (NYSE:LHX) is another well heeled defense and aerospace stock with a sizeable presence in lucrative sectors such as space and communications. The firm has beaten analyst EPS estimates in all four of its latest quarters and the shares are rated Buy on average.
As of September 2023 end, 44 out of the 910 hedge funds profiled by Insider Monkey had bought and owned L3Harris Technologies, Inc. (NYSE:LHX)'s shares. Ric Dillon's Diamond Hill Capital was the biggest investor through its $252 million investment.
Howmet Aerospace Inc. (NYSE:HWM) sells aircraft engine components and associated products all over the world. The firm is currently embroiled in a conflict with Lockheed Martin which has sued it to continue providing titanium components for the F-35 at earlier prices; a claim that Howmet Aerospace Inc. (NYSE:HWM) argues is impossible to implement considering the modern day supply chain environment.
46 out of the 910 hedge funds covered by Insider Monkey's Q3 2023 research had held a stake in the firm. Howmet Aerospace Inc. (NYSE:HWM)'s largest hedge fund stakeholder is William B. Gray's Orbis Investment Management as it owns a $319 million stake.
The Boeing Company (NYSE:BA), Howmet Aerospace Inc. (NYSE:HWM), TransDigm Group Incorporated (NYSE:TDG), and RTX Corporation (NYSE:RTX) are some aerospace and defense stocks that hedge funds are piling into.
