Military spending is big business in the U.S. The current defense budget is $934 billion and is the second-biggest item in the federal budget after Social Security. That’s why it makes sense to look at the best defense stocks to buy right now.
With the largest and most powerful military in the world, America is able to support an extremely strong, advanced and innovative defense industry. The leading defense companies in the world are based around Washington, D.C. where they lobby and jockey for lucrative contracts from the Pentagon.
Defense spending is big business, and for savvy investors, it can pay off in a big way. Here are four of the best defense stocks to buy right now.
- Lockheed Martin (NYSE:LMT)
- Northrop Grumman (NYSE:NOC)
- Raytheon Technologies (NYSE:RTX)
- Boeing (NYSE:BA)
Defense Stocks to Buy Right Now: Lockheed Martin (LMT)
Lockheed Martin is a marquee name among defense companies. The biggest defense contractor in the world, Lockheed Martin is to the defense industry what Apple (NASDAQ:AAPL) is to the consumer technology sector.
Headquartered in Bethesda, Maryland, Lockheed Martin is involved in all areas of the defense industry, from next-generation stealth fighter jets to attack helicopters, underwater missiles, armored vehicles and naval warships. In 2020, the company reported net earnings of $6.9 billion on sales of $65.4 billion.
LMT stock has performed admirably this year. Since late January, Lockheed Martin’s share price has climbed 20%. The stock reached fresh highs after the Pentagon named Lockheed Martin a finalist to design a next-generation missile system, a contract that is potentially worth tens of billions of dollars.
Lockheed Martin is also getting a lift from its $4 billion takeover of Aerojet Rocketdyne (NYSE:AJRD), a deal that will provide Lockheed Martin with greater access to the rocket engines and propulsion systems that are in demand with space companies and missile manufacturers.
There’s lots of reasons to be bullish on this stock.
Northrop Grumman (NOC)
So far this year, NOC stock is up 18%. The company, based in Falls Church, Virginia, is one of the world’s largest manufacturers of military weapons and technology.
Northrop Grumman employs nearly 100,000 people and also has a robust aerospace division. It’s best known for the stealth bombers it manufactures that are capable of deploying nuclear weapons. Currently, Northrop Grumman is in the process of developing its next generation of stealth bomber known as the B-21 Raider, a long-range bomber that can drop conventional and nuclear weapons.
With annual sales of $35 billion and numerous long-term contracts with the U.S. government, Northrop Grumman is a fairly sturdy investment. NOC stock experienced some turbulence last year during the depths of the Covid-19 pandemic, but has seen a positive turnaround this year following the U.S. presidential election last fall and the accelerated deployment of vaccines against the coronavirus.
The Pentagon’s Missile Defense Agency (MDA) at the end of March awarded Northrop Grumman and the aforementioned Lockheed Martin an initial $1.6 billion contract for the two companies to develop and demonstrate concepts for a new missile defense interceptor program designed to protect the U.S. from foreign intercontinental ballistic missiles.
Defense Stocks to Buy Right Now: Raytheon Technologies (RTX)
Waltham, Massachusetts-based Raytheon Technologies is primarily and aerospace and cybersecurity firm. It manufactures items for the U.S. military such as aircraft engines, avionics systems, cybersecurity platforms, missiles, drones and air defense systems.
In 2020, the company posted revenues nearing $100 billion, and it currently employs nearly 200,000 people worldwide. Raytheon also has a number of well-known subsidiaries, including Pratt & Whitney, which makes aircraft engines, and Collins Aerospace, which makes avionics and mission systems.
RTX stock has had a nice run since the end of January. Like all the companies on this list, Raytheon Technologies is an expert when it comes to winning U.S. government contracts.
In February, Raytheon received 14 new contracts with a total value of $644.4 million. The company is providing the all-important engines to the F-35 stealth fighters through its Pratt & Whitney subsidiary and also has a contract to provide equipment support and maintenance facilities for the state-of-the-art F-35 fighter aircraft.
The F-35 contracts should pay dividends to Raytheon for many years to come.
Most people think of commercial aircraft when it comes to Boeing Co. The Chicago-based company has mostly been in the news over the past few years for crashes related to its commercial passenger airplanes.
However, the company also operates the Boeing Defense, Space & Security division out of Arlington, Virginia that employs 50,000 people and generates more than $20 billion in annual revenues. The defense portion of Boeing’s business is primarily focused on military aircraft, including bombers, radar surveillance planes and even refueling aircraft. Additionally, Boeing’s defense unit makes missiles and satellites used in space.
Boeing’s defense business has been surging this year. So far in 2021, Boeing’s defense sales are up $3.6 billion compared to the first quarter of 2020. Much of that sales growth is due to the contract it received from the Pentagon for 27 of its KC-46 Pegasus aerial refueling and military transport aircraft. Boeing has also received orders to upgrade the software and cybersecurity controls on the Apache attack helicopters, and to perform network upgrades on U.S. airborne warning and control systems.
BA stock has been running hot lately too, up 30% year-to-date at just under $255 a share. While much of the gains have been due to Boeing’s commercial aviation division, the military side of the business plays a role in the company’s success too.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article.