We recently published a list of 10 Best Large Cap Defense Stocks to Buy Now. In this article, we are going to take a look at where Axon Enterprise, Inc. (NASDAQ:AXON) stands against other best large cap defense stocks to buy now.
The world has been rocked with conflict over the last few years, with the number of conflict zones worldwide increasing by nearly two-thirds since 2021. Ukraine, the Middle East, and parts of Africa have been the most intense theatres of war during this period.
While the human impact of these conflicts has been tragic, the defense industry has profited by luring investors into piling up their stocks, with several of the world’s top contractors seeing their shares book all-time highs in 2024. An Aerospace & Defense ETF issued by iShares had returns of over 17% during the last calendar year. It is up 5.38% this year, as of February 14.
Defense sector experts see long-term growth potential under the Trump administration, as he is credited for leaving a mark on the U.S. military during his first stint, which saw the establishment of the United States Space Force (USSF) and defense spending reach record highs. During his election campaign, the 78-year-old repeatedly made mention of wanting to build a missile defense shield for the country, similar to the Iron Dome.
However, defense stocks fell sharply last week after Trump suggested the country could rapidly cut military spending in the future. He made these comments in the context of a potential future conference with China and Russia to discuss cutting defense expenditure to spend the money in other areas.
“When we straighten it all out, then one of the first meetings I want to have is with President Xi of China and President Putin of Russia, and I want to say let’s cut our military budget in half. And we can do that, and I think we’ll be able to do that.”
The U.S. president has shared mixed statements on defense spending throughout his campaign and the early days of his second stint. Trump has appointed Elon Musk to lead the Department of Government Efficiency (DOGE), which will work outside the federal stream and aims to improve governance by reducing wasteful spending, cutting unnecessary regulations, and restructuring federal agencies.
Trump has also vowed to end the tumultuous wars in Ukraine and the Middle East. Some analysts view his anti-war stance as detrimental to defense stocks. Russell Hackmann, president at Hackmann Wealth Partners, stated the following while talking to Quartz on November 4.
“Trump is more anti-war and therefore that is worse for the defense stocks.”
Methodology
We used stock screeners to identify companies in the aerospace and defense industry with a market cap between $10 billion and $200 billion as of the close of business on February 14, 2025. Then, we picked the top 10 stocks with the highest number of hedge fund stakes. We ranked them in ascending order of hedge fund holders in each company.
Data on hedge funds was sourced from Insider Monkey’s database of 900 hedge funds for the third quarter of 2024. In the case where two or more stocks were tied on the number of hedge fund holders, we outranked one over the other on market capitalization.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Is Axon Enterprise, Inc. (AXON) the Best Large Cap Defense Stock to Buy Now?
A technician in a white coat testing an in-car system on a modern military vehicle.
Axon Enterprise, Inc. (NASDAQ:AXON) manufactures weapons and technology for law enforcement agencies, military, and civilian use. The company integrates cloud software solutions and hardware devices to help enable modern policing, defense, and security. It has a diverse product catalog featuring conducted energy devices, cameras, and sensors, among others.
The company’s share price has surged by nearly 700% over the last five years, helped by several strategic acquisitions and partnerships formed during the period, and robust demand for its TASER segment. Another major driver behind the gains has been Axon Enterprise, Inc. (NASDAQ:AXON)’s strong financial performance. As of Q3 2024, the global public safety technology leader had marked 11 successive quarters of 25% revenue growth.
Investors have been encouraged by Axon Enterprise, Inc. (NASDAQ:AXON)’s results, which is reflected in the number of hedge funds having a stake in the company growing to 46 at the end of the third quarter of 2024, from 36 in Q2, according to Insider Monkey. Conestoga Capital Advisors stated the following regarding Axon in its Q4 2024 investor letter:
Axon Enterprise, Inc. (NASDAQ:AXON) continued to see robust demand for its products and services, from TASERs to body cameras to the software that powers many applications within public safety operations. Shares jumped on third-quarter results, which saw revenue grow 32%, EBITDA 58%, and backlog 33% to $7.7 billion. In addition, AXON continued to expand adjusted EBITDA margins, which were above 25% in the third quarter. AXON was a leader in three of the four quarters in 2024.
Wall Street sentiment around the company also remains bullish, with analysts having a consensus Strong Buy rating for the stock, making Axon Enterprise, Inc. (NASDAQ:AXON) one of the best large cap stocks to buy now.
Overall, AXON ranks 8th on our list of best large cap defense stocks to buy now. While we acknowledge the potential of defense companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AXON but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
