The stability of their major customers gives defence companies and investors a certain amount of predictability when it comes to managing cash and forecasting growth. Defence companies enjoy predictable revenues, and the U.S. government provides five-year forecasts for planned purchases each year. Unlike other areas of the stock market, the defense industry has a stable, reliable source of income from the U.S. government. Free cash flow, or how much money the business makes after expenses, is essential to any business. Still, investors should remember that this figure may differ for defense contractors depending on whether their projects are new or established.
With the Canadian government’s plans to boost Canada’s national defence capabilities and purchase military tools to support Ukraine under the Canadian federal budget of 2022, the companies mentioned above may see some movements in their business operations and share prices. Canada’s federal budget for 2022 includes more military assistance worth over $90 million and lethal and non-lethal military aid for Ukraine.
Top Defense Stock to Buy
With this in mind, here are the top seven defence stocks that are poised to profit from this expensive build. The best defense stocks have long-term plans and hold positions on the major emerging priorities of the Pentagon and America’s allies around the globe. If you are bullish on defense but do not want to pick from individual companies, lower-risk investments such as Exchange-Traded Funds (ETFs) cover the defense industry.
Lockheed Martin (NYSE: LMT)
The United States and its allies have ordered 3,100 F-35s through 2035, making Lockheed Martin one of the best stocks in the defense industry to earn consistent, long-term revenues. In addition, missile defense systems are in high demand.
Raytheon (NYSE: RTX)
Raytheon builds the Patriot missile-defence system and the Aegis air defense system interceptors. Raytheon Technologies (RTX) is one of the best defense stocks, with threats from China, Russia, North Korea, and Iran becoming top priorities for the United States and its allies.
Northrop Grumman Corp. (NYSE: NOC)
Aircraft Modeling Systems This category includes sales related to manufacturing, and R&D, design, engineering, test, and evaluation services related to the hardware and software technologies used by military and security forces for developing, experimenting with, and testing operational doctrines and training personnel using scenario-based situations (e.g., intelligent software, vision systems, network simulators, live-action simulators) primarily related to aircraft and operations in the air domain.
General Dynamics Corp. (NYSE: G.D.)
General Dynamics Corp.s (G.D.) Gulfstream commercial aircraft led the Aerospace sector, which includes the commercial aircraft services unit.
Firearms and Other Weapons This category includes military sales related to production as well as research, development, design, engineering, testing and evaluation services related to technologies used aggressively to obtain or protect a tactical advantage over adversaries; for an attack, defense, and protection of assets and personnel. Excluded from this category are sales related to maintenance, repair and overhaul (MRO) services of military aircraft; aircraft communications systems; navigation systems; aircraft electronics; airborne sensors; missiles, missiles, and bullets manufactured to fire from aircraft platforms; display units; and other electronics of crewed military aerial platforms–these are to be reported in the individual defense products and services categories, as applicable.
Military and Aerospace Companies
Magellan Aerospace is a Canadian aerospace company serving the commercial and defense markets, including space agencies. This Toronto-based company provides services in advanced engineering capabilities for military/security markets as well as government agencies in Israel. Vectrus (VEC) operates U.S. military bases and facilities worldwide, providing supply chain and logistics, I.T. support, engineering, security, and other services.
Its solutions deliver things like precision-guided missiles (defense), flight controls (commercial aviation), and components and systems for satellites and launch vehicles (space). Vectruss suite of products (vec) includes aircraft engines, guided missiles, satellites, unmanned aerial vehicles, ground-based combat systems, torpedoes, air-traffic-control systems, radars, and more. Lockheed Martin (LMT) also produces Sikorsky military and civilian helicopters and various rockets and fire-control systems.
MDA is a satellite and robotics space company from Canada.
Why Invest in Defense Companies
CNN’s Jim Cramer said he is bullish on the defence sector and has four stocks he believes are worthy of an investment. CNBC’s Jim Cramer added that the U.S. and countries in Europe are likely to seek more investments in the defense sector. The recent boost for energy and defence stocks is expected to continue as the world adapts to changes caused by Russia’s incursion into Ukraine.
Indeed, energy stocks on the S&P 500 rose 42.3% during the first quarter to March 25, and aerospace and defense stocks on the S&P 500 rose 13.5% during the same time frame.
Clicking any of the links in the following table will give you more details, both descriptive and quantitative, about Aerospace & Defense ETFs. This page includes historical performance information on all Aerospace & Defense ETFs listed on U.S. exchanges currently tracked by ETF Database. The following table consists of the primary holdings data for all U.S.-listed Aerospace & Defense ETFs presently tracked by ETF Database. In addition, the following table includes spending data and other descriptive information for all U.S. listed Aerospace & Defense ETFs that ETF Database currently tags.
The Invesco Aerospace & Defense ETF (PPA) holds a wide variety of stocks, including some companies that are not exclusively devoted to defense, such as those involved in civil aerospace production. Many associate defense companies with tanks and guns, but the defense industry is generally defined more broadly to include companies supplying the Pentagon or other government agencies in the first place. The defence industry also tends to pay healthy dividends; cash paid out to shareholders per share held, partly because part of the defence companies’ R&D is funded through U.S. government defense spending, which frees up money for shareholders to recoup. Defense companies’ stocks generally fare relatively well during economic downturns; they are likely to hold their value during a downturn due to the acyclic nature of defense spending.