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 RTX Corporation (NYSE:RTX) 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 RTX Corporation (RTX) the Best Large Cap Defense Stock to Buy Now?
An aerial view of a commercial jetliner in flight, its airframe glinting in the sun.
RTX Corporation (NYSE:RTX) is a giant in the global aerospace and defense industry. It provides systems and services to commercial, military, and government clients. It operates through three main businesses: Collins Aerospace, Pratt & Whitney, and Raytheon.
The company continues to receive high-value defense contracts, which has made it an attractive stock for investors. On January 3, RTX Corporation (NYSE:RTX) was awarded a $946 million contract to supply additional Patriot air and missile defense systems to Romania. The contract is inclusive of radars, missiles, and control stations.
In October last year, RTX Corporation (NYSE:RTX) clinched a $736 million deal from the Navy to produce AIM-9X SIDEWINDER missiles. Later, in December, it won a $590 million production contract – again from the Navy – for the Next Generation Jammer Mid-Band (NGJ-MB) system.
During its Q4 2024 earnings call on January 28, RTX Corporation (NYSE:RTX) reported $21.6 billion in quarterly sales, up 9% compared to last year. Adjusted EPS was logged at $1.54, beating expectations of $1.38 per share. The company ended the year with a backlog of $218 billion, up 11% year-over-year. Moreover, it returned $852 million in capital to shareholders during the quarter.
Investor sentiment around RTX Corporation (NYSE:RTX) remains robust. According to Insider Monkey’s database for Q3 2024, 72 hedge funds held a stake in the company, up from 54 at the end of the second quarter. Longleaf Partners Fund stated the following regarding RTX in its Q4 2024 investor letter:
RTX Corporation (NYSE:RTX) – Aerospace and defense company RTX was a top contributor for the year. Our appraisal value has grown nicely since we first purchased the company just over a year ago. While the issues for Pratt & Whitney’s (P&W) Geared Turbofan engine are still not yet fully fixed, they have gotten better and given us another reminder that the point of maximum pessimism is only obvious in retrospect. We continue to have a conservative valuation on P&W so view this as a source of future value upside. The Raytheon segment has also performed better as the year has gone on, with recent signs of margin improvement. Strong industry tailwinds, prudent capital allocation and a solid balance sheet provide a foundation for sustained growth and eventual full value recognition.
Overall, RTX ranks 1st 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 RTX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
