Best Aerospace and Defense Stocks

One of the biggest names among military contractors, Lockheed Martin develops and manages several iconic fighter jets, including the F-16 Fighting Falcon, the F-35 Lightning II and the ultra-advanced F-22 Raptor. As such, Lockheed Martin is the big stick that buttresses the U.S. administration’s softly spoken diplomacy. However, it’s not all guns and missiles as the company offers several civilian aircraft for various applications. If you’re looking for versatility in your aerospace and defense stocks, Honeywell checks off several important boxes. First, under its aerospace division, Honeywell manufactures engines and avionics, along with auxiliary power units and other critical devices. Second, the company provides propulsion products and services for U.S. and international military branches. Finally, Honeywell became part of the national discussion as it’s one of the few domestic producers of N95 respirators. Perhaps most famous for originally developing the F-16 Fighting Falcon, General Dynamics continues to hone its aerospace cred with the Gulfstream, a sleek business jet well known to high-powered executives. On the military front, General Dynamics provides critical systems for the F-35 Lightning II. Additionally, the company is incredibly diverse, featuring a maritime division that specializes in nuclear-powered submarines and oil tankers and dry cargo carriers. Airbus is a major aerospace and defense firm. The company designs, develops, and manufactures commercial and military aircraft, as well as space launch vehicles and satellites. The company operates its business through three divisions: commercial, defense and space, and helicopters. Commercial offers a full range of aircraft ranging from the narrow-body (130-200 seats) A320 series to the much larger A350-1000 wide body. The defense and space segment supplies governments with military hardware, including transport aircraft, aerial tankers, and fighter aircraft (Eurofighter). The helicopter division manufactures turbine helicopters for the civil and parapublic markets Easily the riskiest company on this list of aerospace and defense stocks, Boeing suffered well before COVID-19 because of high-profile crashes involving its 737 MAX 8 commercial jetliner. One of the most conspicuous consequences was that Boeing no longer could deliver positiveearnings per share. Of course, the pandemic exacerbated these woes. Nevertheless, the return of consumer sentiment for air travel could lift BA stock sustainably from its doldrums. Back in February and March 2020, aerospace and defense stocks were in freefall. Suddenly, instead of symbolizing the speed and connectivity of the modern economy, the whole of the aviation industry ground to a halt. Even the military was put in a bind as soldiers often live and work in close quarters. The advent of a COVID vaccine further deepened the divide as some in the Armed Forces chose to be discharged rather than be inoculated. Likewise, many seething geopolitical rivalries faded into the backdrop as the international community focused on combating the threat of the coronavirus. Now that much of the world has returned to some semblance of normal,air travel has picked up dramaticallyfrom its 2020 lows, according to data from the U.S. Bureau of Transportation Statistics. Also, prior geopolitical rivalries flared up again, which incentivizes military-related spending. Below are the best aerospace and defense company stocks to watch out for this year as youinvest. Thanks to the intersection of national security interests and the drive for economic competition, the best aerospace and defense stocks historically provide an excellent arena for buy-and-hold investors to grow their portfolios. Unfortunately, the COVID-19 crisis proved that very few sectors could avoid the initial volatility associated with a once-in-a-century pandemic. At the same time, defense contracts never stop, and these contracts have a massive impact on the stock market. As defense contracts are awarded, defense firms see increases in both cash flow and stock prices. This means that aerospace stocks and defense companies are constantly changing in valuation. Their receivables, while massive, are still subject to change. Government contracts could go to the competition and defense spending could be reallocated at any time. Plus, Wall Street can see strength in a particular industry, be it the technology side or the manufacturing side. Investors know how much government spending is expected from these firms, and that often impacts everyone’s trading strategy. Nevertheless, the U.S. and the global community came together to manufacture and distribute a vaccine in record time. With a return to normalcy comes economic opportunities, along with a resurgence of old rivalries, both boding cynically well for aerospace and defense stocks. As one of the most competitive and lucrative market segments, aerospace and defense stocks fundamentally offer investors a double dose of profitability potential. First, the aerospace industry transformed the 20thcentury, enabling people to travel great distances at unprecedented speed. As we progress along the technological spectrum this century, aerospace firms are aiming even higher. For instance, experts believe that space tourism will become a $1.57 billion industry by 2028. This doesn’t even count military spending, which is always quite high. Second, investors can readily bank on the relevance of the defense component of the aerospace market. No matter how humanity progresses, the conflict appears inevitable — and there may be plenty of it. As the world’s sole superpower, the U.S. has a unique responsibility to project power and deter adversarial or belligerent actors from undermining American interests and that of U.S. allies. Further, because of a transition in power in Washington, D.C., and the stark shift in leadership culture, a few nations appear to be testing the Biden administration. Therefore, it’s possible that defense spending could increase to counteract such high-level shenanigans, which may bode well for aerospace and defense stocks. Additionally, Deloitte reports that U.S. allies such as Japan are beefing up their security profile, potentially providing additional revenue streams for American defense contractors, especially as the defense budget continues to rise with inflation. Finally, the COVID-19 crisis initially imposed what appeared to be crippling volatility among aerospace and defense stocks. Logically, with billions of people around the world practically forced into quarantine, airplanes sat parked on tarmacs. Not only was that devastating for commercial airliners, but the aerospace industry also suffered steep losses in product and service revenues. However, with the return of consumers wanting to make up for lost time, the defense sector could see a revival. Contract awards to firms like Northrup Grumman and United Technologies can easily drive up the gross domestic product. Though you may find a few exceptions to the rule, aerospace and defense stocks tend to be well-capitalized and deeply established blue-chip names. Given the complex nature of the business, along with its mission-critical profile, the industry features a high barrier to entry. Therefore, you usually don’t have to worry about an upstart competitor ruining your portfolio. Further, the tough-to-crack aerospace sector enables you the freedom to choose your online broker based on your lifestyle and preferences. With the best aerospace and defense stocks on this list mostly being household names, any brokerage will carry their equity units. To help you decide, below are the best online brokers for the aerospace and defense industry. In many ways, aerospace and defense stocks represent an intriguing contradiction. Invariably, the defense component draws much controversy because of its underlying product’s deadly effectiveness. On the other hand, military innovations have the propensity to improve civilian applications. From the investor’s point of view, aerospace and defense stocks offer a 2-for-1 approach. During bull markets, the aerospace component enjoys substantial demand as people travel around the world. In times of geopolitical tension, the defense angle can hedge an investor’s portfolio against certain risks. Therefore, this sector is always worth consideration. Aerospace and defense stocks are shares in companies that are in the air or defense industries. Because the airline industry is making a comeback, aerospace and defense stocks are considered a good investment. Check out the list by Benzinga above that outlines the best aerospace and defense stocks. Ryan Petersonis a seasoned personal finance writer with a Bachelor’s Degree in Business from Indiana University. With over five years of experience, Ryan has crafted insightful content for multiple finance websites, including MoneyLion At Benzinga, he brings his expertise and passion for helping readers navigate the complex world of personal finance and investing, empowering them to make informed financial decisions. A newsletter built for market enthusiasts by market enthusiasts. Top stories, top movers, and trade ideas delivered to your inbox every weekday before and after the market closes.