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Top 4 Defense Stocks To Buy Before The Election
Geopolitical conflicts are at their worst in over a decade.
The conflict between Russia and Ukraine shows no signs of slowing. The United States has spent $113 billion supporting Ukraine and this number will likely only grow.
Nearly one year after Hammas attacked Israel, the Israeli Army is still fighting in Gaza, and a ceasefire is unlikely.
Civil war is occuring in Myanmar, Somalia, and Sudan. Cartel violence and drug wars have destabilized Mexico.
The world is more unstable than it has been in years and at the same time, a critical presidential election could bring significant changes.
The Defense Sector keeps America safe during all of this chaos.
Since December of 2010, the S&P Aerospace & Defense Select Industry Index has grown nearly 500%.
This long-term trend is set to continue as the United States spends more on defense spending than the next 9 countries combined.
Here are the top 4 defense stocks every investor should consider adding to their portfolio.
Defense Stock #4: Lockheed Martin (LMT)
Lockheed Martin (LMT) was formed in 1995 when two leading aerospace companies, Lockheed Corporation and Martin Marietta, merged.
The Lockheed Corporation became known for a series of significant aircraft, including the famous P-38 Lightning of World War II and the U-2 spy plane. Martin Marietta specialized in chemicals, aerospace, and electronics. It was involved in space exploration projects and military hardware.
Today, Lockheed Martin is a leading manufacturer of military aircraft, most notably the F-35 Lightning II, the most advanced fighter jet currently in use by the U.S., the U.K., Italy, Japan, and Israel.
The company also produces the C-130 Hercules, a versatile military transport aircraft, and the F-22 Raptor, a highly advanced stealth fighter.
Lockheed Martin produces a variety of missile systems, including a surface-to-air missile (SAM) system, used by the United States, Israel, Ukraine, among others.
Lockheed recently beat earnings expectations by 6%. It’s a stalwart defense company which can be relied on to deliver steady growth. Shares have grown 105% since the end of 2018.
One of its highest growth divisions is its space business. Lockheed Martin builds spacecraft for NASA Missions, commercial satellites, and military communication satellites. It plays a significant role in the Orion spacecraft, part of NASA's Artemis program to return humans to the Moon.
Investors buying in today currently receive a dividend yield of around 2.3%. In 2024, the company plans to repurchase $4 billion worth of shares.
If you’re looking for a dependable defense stock and would prefer to trade high-growth for safety, Lockheed Martin is an investment you should consider.
Defense Stock #3: Northrop Grumman (NOC)
In 1994, Northrop Corporation acquired Grumman Corporation to form Northrop Grumman (NOC). This new entity continued buying other defense and military technology businesses in the years that followed.
It produces a variety of advanced aircraft such as the B-2 Spirit stealth bomber, which is famous for its low observable stealth technology designed to penetrate dense anti-aircraft defenses.
Northrop Grumman is a leader in sophisticated radar, sensor systems, and other electronic warfare capabilities that are crucial for modern military operations.
The company is also involved in satellite and space exploration. Northrop Grumman manufactures components for the James Webb Space Telescope, the largest telescope in space, and other significant space exploration initiatives.
It provides cybersecurity solutions and is involved in the development of artificial intelligence applied to defense and space exploration. “Increasingly, nefarious agents are taking to connected networks to render damage or essentially hold entities financially hostage. Northrop can potentially address this critical area,” InvestorPlace.com said.
When the company reported Q2 earnings, it beat Wall Street’s expectations by 7.2%. Shares appear to be undervalued. They trade at 1.76x trailing-year sales, but in the past year,, the average multiple stood at 1.81x.
Investors earn an annual dividend yield of around 1.7% and those who’ve held this stock since the end of 2018 are up 107% on its share price.
Defense Stock #2: RTX (RTX)
Rtx Corp (RTX) was founded through the merger of two major companies, Raytheon Company and United Technologies Corporation, completed in April 2020.
Today, it's known for its significant contributions in the aerospace and defense sectors.
RTX provides advanced aerospace systems for commercial, military, and business aviation markets. It’s a major supplier of defense products for the U.S. military and allied forces worldwide, including missile systems, radars, and advanced sensors.
One of RTX’s biggest products is the Tomahawk Land Attack Missile. It can quietly glide over a thousand miles, striking targets deep within enemy territory from the sea, air, or land. It’s a favorite tool of the U.S. and Royal Navy, the Tomahawk is all about precision and reach, capable of navigating through tightly guarded airspace, whether launched from submarines, ships, or ground platforms.
Like the other defense stocks on this list, RTX also manufactures jet engines, offers cybersecurity and intelligence services, and has a massive budget for developing AI.
When the company reported earnings in Q2 2024, revenue grew 7.7% compared to a year earlier, net cash was up 11.5%, although net income and gross profits were down.
“RTX's commercial aerospace businesses look set for good long-term growth… RTX does look undervalued, even if you assume it only has nominal GDP growth prospects,” The Motley Fool recently said.
It currently pays a 2.14% dividend yield and shares are up 38% in 2024 alone.
Defense Stock #1: Kratos Defense (KTOS)
Kratos Defense (KTOS) is the highest reward/risk stock on this list.
The company was founded in 1994 as Wireless Facilities, Inc., a wireless infrastructure company. Over time, the focus shifted from wireless communications to defense and security technology. The company rebranded as Kratos Defense & Security Solutions in 2007 to reflect its new strategic direction.
Since then, Kratos has acquired companies and expanded its capabilities in unmanned systems, satellite communications, cyber warfare, and missile defense, among other areas.
This strategic shift has transformed Kratos into a key player in the defense and security sectors, focusing on advanced technologies that are integral to modern warfare and security operations.
“For years, Kratos has been developing a range of ‘loyal wingman’ UAVs designed to fly into battle alongside crewed fighter jets to confuse radar systems, provide greater firepower, and extend range. Kratos said its flagship drone, the Valkyrie, has two customers considering two separate orders, with management hopeful to get at least one order before the end of 2024,” The Motley Fool reported.
The company said tensions in the Middle East are fueling new customer interest in its drone products.
Kratos Defense has a market cap of just $3 billion, 34-times smaller than Lockheed Martin’s (LMT) $129 billion size.
Revenue grew 19.6% in Q1 2024 compared to a year earlier and EBITDA rose 60.8% over the same period.
Shareholders are not paid a dividend yield, but this stock is more of a growth than income play. Shares are up 50% over the past 12 months and could climb higher.
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