Listen to the audio version of this article (generated by AI).
“Arming.”
Army Chief Warrant Officer 2 Nate Shea had maneuvered his drone behind a fixed-wing target aircraft. Seconds later, he detonated the Claymore mine his drone was carrying.
Watching on a screen, 1st Lt. Francesco La Torre looked up in time to see the target plummet.
The Army’s first drone-on-drone strike had just taken place during a live-fire demonstration at Fort Rucker, Alabama.
This had taken weeks to prepare.
Paratroopers practiced for hours each day. Pilots trained in changing weather to intercept an aircraft that could appear anywhere.
La Torre described the potential plainly: “With the right kit,” paratroopers could use “a low-cost system with preexisting munitions” to protect their units.
Those four words, with the right kit, carry the investment story.
Equipping more units requires hardware, training, reliable components, and manufacturers capable of delivering at scale. Adding AI and autonomy creates further opportunities for the companies developing the next generation of military systems.
That’s why I’m watching defense stocks closely, even as investors worry about politics, interest rates, and the direction of the next peace-talk headline.
This week, I joined The InvestorPlace podcast with Jonathan Rose to explain why I believe the military’s need to replenish weapons and develop new capabilities could support years of demand.
My approach pairs established contractors like Lockheed Martin (LMT) and Northrop Grumman (NOC) with companies pursuing growth in drones and space, including Rocket Lab (RKLB), and Planet Labs (PL).
But an attractive business outlook doesn’t automatically signal that a stock has finished falling.
Jonathan and I discuss that distinction, including the buying activity he wants to see before gaining confidence in a recovery.
Watch our conversation below to see which defense companies we’re watching, plus what could turn military demand into the next stock-market opportunity:
From One Successful Strike to an Entire Military
Right now, America faces three overlapping demands: replenish weapons already consumed, prepare for warfare increasingly shaped by drones and AI, and expand the industrial capacity needed to do both.
Each creates work for a different part of the defense industry. Taken together, they could support lasting demand.
While a successful drone demonstration can establish what is possible, equipping an army requires a much larger commitment.
I’m looking for companies that can turn those requirements into market-ready products… and orders they can fulfill profitably.
One established company deserves a closer look here…
Defending the Skies
The basic appeal of a missile manufacturer is pretty straightforward: Militaries use weapons, then order replacements. Defending against an aerial attack, however, involves much more than firing an interceptor.
First, a system has to detect the incoming object. Then it must track it, help determine the threat, and support a decision about how to respond. The interceptor has to reach its target. Afterward, crews must be able to defend against the next attack.
This is where RTX (RTX) and its Raytheon business comes in, as it supplies several pieces of that process.
Its products include Patriot air and missile defense equipment, GEM-T interceptors, and the Lower Tier Air and Missile Defense Sensor, or LTAMDS — a radar designed to strengthen the military’s ability to detect and track threats.
That breadth is what’s important here.
“Patriot” describes a defense system with multiple components and suppliers. Investors need to understand which company supplies which equipment, because spending on an interceptor, a radar upgrade, or additional launch equipment can create different revenue opportunities.
For RTX, the potential extends across replenishment, upgrades, and additional systems.
An existing customer may need replacement interceptors. Another may seek better radar coverage. A third may want to expand the number of locations it can protect.
Those decisions can generate years of work involving manufacturing, integration, maintenance, and support.
Why Cheaper Drones Can Create Demand for Better Defenses
The Fort Rucker demonstration also points to a critical economic problem for military planners… Namely, the worth of an expensive interceptor when it protects soldiers or critical infrastructure.
Comparing its price with the attacking drone’s price alone misses the value of what is being defended. But that math is complicated by persistent adversaries who can keep throwing inexpensive aircraft at their problems.
Defenders need enough weapons to withstand repeated attacks. They also need a range of responses suited to different threats.
That is one reason I’m interested in layered defenses: systems that combine detection and tracking with multiple ways to defeat an incoming target.
Raytheon’s counter-drone products, including its Coyote interceptors and Ku-band Radio Frequency System radar, give RTX exposure to this requirement as well.
It also reinforces a central part of my thesis: New technology can create additional demand for established defense suppliers, particularly when those suppliers already have products, customer relationships, and manufacturing experience relevant to the problem.
Yet military demand is only the beginning of the investment case.
The company still needs to obtain components, hire and train workers, manage its suppliers, and deliver on terms that leave a profit.
That is why I would evaluate RTX through several connected measures: orders, deliveries, margins, and cash flow.
But RTX also has businesses beyond Raytheon. Collins Aerospace and Pratt & Whitney give it substantial exposure to commercial aviation as well as military customers.
That diversification broadens its opportunities, but it also means defense demand alone cannot explain the stock. Engine-program costs, airline activity, manufacturing performance, and other aerospace developments can influence companywide results.
The Bottom Line on RTX Stock
As I explained in my conversation with Jonathan Rose, I see room for both established contractors and emerging defense technology companies.
The established businesses bring manufacturing experience, longstanding programs, and customers already using their equipment. Smaller drone, autonomy, and space companies may offer faster growth, alongside greater volatility and execution risk.
RTX belongs on the established side of that approach.
Its appeal is the opportunity to supply equipment militaries need to replenish, improve, and expand… and to support that equipment over time.
The Fort Rucker team showed what skilled soldiers and engineers could accomplish with the right tools. Making capabilities like that widely available requires a much larger network of manufacturers, technology developers, and suppliers.
I believe the companies meeting those needs could become some of the next major stock-market winners.
In my Rearming America briefing, I follow that demand from missile replenishment to drones and autonomous systems, and into the materials and production capacity behind them. Watch it now to see the other companies I’m researching and how they fit into the build-out.
