If you’re wondering why defense stocks are in full focus today, look to the current events section of your favorite news source. The U.S. House of Representatives has voted in favor of passing the National Defense Authorization Act (NDAA), a bill that will provide an additional $886 million for defense-related purposes. Its passing will ensure additional aid for Ukraine and potential action against China, should it be deemed necessary. The bill received strong bipartisan support, first passing the Senate with an 87 to 13 vote on Wednesday and then passing with a House vote of 310 to 118 yesterday. That’s more than the two-thirds majority needed to pass it on to President Joe Biden to sign it into law.

The passing of the NDAA will mean a 5.2% pay raise for the troops. But it will also allow for the purchasing of new ships, aircraft and other types of ammunition. For defense stocks, that means a promising start to 2024, as the military will likely issue new defense contracts.

Which Defense Stocks to Watch in 2024

Given the strong bipartisan support the NDAA has received, we can expect President Biden to sign it soon. While this hasn’t boosted aerospace and defense stocks by too much yet, once the bill passes, it should generate plenty of momentum. As the Washington Post reports:

“The sprawling bill — numbering 3,000-plus pages — is a product of months of negotiations between leaders from both political parties who worked to bypass most of the demands made by hard-line House Republicans. It authorizes expanded military partnerships in the Indo-Pacific and Europe — ongoing efforts aimed at countering China and Russia, respectively — and structural improvements at several Defense Department [facilities. It] also directs the procurement of new weapons and missile-defense systems and outlines a host of other national security imperatives.”

After months of deliberation about whether the U.S. will continue providing aid to Ukraine, this is a promising development for those who believe it is necessary. Meanwhile, the prospect of further conflict in East Asia if China’s aggression towards Taiwan continues, still looms large. The underlying fact is that geopolitical tensions will only likely escalate in the coming year. For companies in the aerospace and defense sector, that will mean an abundance of lucrative government contracts.

Which defense stocks should investors be watching in 2024? To start, they should look to the sector’s leaders. Lockheed Martin (NYSE:LMT) has a long history of providing the armed forces with a wide array of technology, equipment and services. It currently holds the position of top defense contractor in the U.S., reporting $63,334.00 in defense revenue for 2022, encompassing 96% of its revenue. Number two on the list is Lockheed’s rival RTX Corporation (NYSE:RTX), formerly Raytheon. This aerospace and defense conglomerate’s defense revenue reached 39,600.00 in 2022. Anytime economic conditions shift in Lockheed’s favor, RTX usually isn’t far behind.

One Other Likely Winner

Another name among defense stocks to watch didn’t make the list of top defense contractors. Nevertheless, smart investors will have Palantir Technologies (NYSE:PLTR) on their radar. This company operates in the data analytics space but has also received multiple lucrative defense contracts, often due to its progress in artificial intelligence (AI) and machine learning. Today, PLTR stock is rising on news that the company has expanded its Vantage contract with the U.S. Army. As my colleague Larry Ramer reports, that could net up to $115 million for the company. Additionally, this stock trades at much lower levels than LMT and RTX, giving investors ample opportunity to profit.

Regardless of how the geopolitical landscape unfolds in 2024, aerospace and defense stocks are poised for growth after the NDAA is signed.

On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.