Tensions are rising around the world, which is good news for some of the top defense stocks to buy.
There’s an ongoing war in Israel. Drone strikes in Iraq are fanning flames across the Middle East. There’s Ukraine. And then there’s the ongoing U.S. issues with North Korea and China. All of which makes some of the top defense stocks to buy indispensable.
Ducommun (DCO)
Ducommun (NYSE:DCO) makes and sells various parts and products for the aerospace sector. It is not as well-known as some of the other names on this list but it is worthy of your attention. For one, it’s a reasonably strong company from a fundamental perspective. When it released earnings in November the results were strong. Earnings per share beat estimates by more than 15%. Revenues increased by more than 5% reaching a record high of $196.25 million.
As one of the top defense stocks to buy, DCO currently trades just below $50. Analysts believe that they should rise to approximately $65 in the medium term.
General Dynamics (GD)
General Dynamics (NYSE:GD) is one of those stocks that everyone thinks about when defense is discussed. It is one of the largest defense firms by market capitalization. Thus, the company has a vast platform that has ways to profit when conflict arises.
The company just won a contract valued at $335 million for fire systems on submarines. It is what is known as a Cost Plus variable contract meaning that its value can rise substantially higher. the total value could rise as high as $611.6 million Assuming options are exercised.
A few days later, the company’s IT division secured a contract valued at $160 million. General Dynamics will train 200,000 Army personnel under the contract.
General Dynamics is a relatively safe, stable investment and includes a dividend. Although that dividend yields a relatively modest 2%, it was last reduced in 1985. General Dynamics is a strong choice for any investors seeking exposure to major government contractors.
Lockheed Martin (LMT)
Rising global tensions are increasing demand for Lockheed Martin’s (NYSE:LMT) products and services. Plus, investors who purchase LMT shares will get a dividend yielding nearly 3%.
Assuming Lockheed Martin’s technology refresh 3 goes smoothly, demand for its F-35 jets should increase. That will result in increased government spending on its F-35. The government is the largest customer of Lockheed Martin. One can only assume that those working in government and making purchasing decisions may be pressing for increased spending as tensions rise.
Anyway, consider Lockheed Martin for the fact that it provides income for one. then, also consider Lockheed Martin for the fact that it’s relatively inexpensive at the moment based on its P/E ratio.
Palantir (PLTR)
The story regarding Palantir (NYSE:PLTR) is all about artificial intelligence. it continues to grow rapidly following 2023 which also saw it grow very rapidly. it has emerged as an important AI stock overall. It is also a firm with ties to the public sector, particularly defense.
That’s probably not the primary reason to consider Palantir at the moment. Instead, investors are going to continue to focus on the fact that its commercial revenues increased by 70% in the December quarter. It’s further proof that the emergence of AI in 2023 is anything but a fad.
So, yes, Palantir is rapidly integrating into a more commercial role. But at the same time, government revenues continue to be the biggest contributor to its overall sales. The point here is simple: government demand for Palantir’s services as a real catalyst ahead as tensions rise. The government seeks any advantage in conflict and artificial intelligence can create decisive advantages.
If none of that is convincing enough, consider that Palantir posted its 5th consecutive quarter of GAAP profitability on Feb. 5.
VSE Corporation (VSEC)
VSE Corporation (NASDAQ:VSEC) provides fleet overhaul, repair, and maintenance services for air and land transportation in both the commercial and government sectors. It’s logical to assume that demand for the company’s already rapidly growing businesses will grow even more.
Further, vse Corporation has a history of providing strong positive surprises upon release of earnings. Investors will thus be very curious in the coming weeks in may purchase heavily in anticipation of a March earnings release.
V2X (VVX)
V2X (NYSE:VVX) provides mission solutions to defense clients in 343 locations across 45 countries. The stock has a lot of potential as one of the top defense stocks to buy for several reasons.
Let’s begin with the notion of bookings. Bookings really refer to the future value of contracts a company has secured. In aggregate those bookings are referred to as a backlog. V2X had a record backlog valued at $13.3 billion at the end of the Third quarter. The company was awarded 1.3 billion of those total bookings in the third quarter.
Don’t let that confuse, the company isn’t all about the future at the expense of the present. Instead, it makes substantial sales now with $1 billion coming in the third quarter. That represented an all-time high and an increase of 5%.
The company already had what it refers to as strong revenue visibility, i.e. that backlog as 2023 wound down. Tensions are rising in 2024 and the company’s backlog is sure to grow as a result.
Terran Orbital (LLAP)
Terran Orbital (NYSE:LLAP) is a satellite manufacturer with a strong connection to the defense sector. The company provides end-to-end satellite Solutions meaning from manufacture to launch planning. However, its stock has gotten rocked over the last 12 months. Shares currently trade for $0.85. However, analysts expect those same shares to roughly quadruple per consensus opinion.
The company also recently resolved a shareholder dispute and will discuss its upcoming results on March 26. There is potential for those shares to rise between now and then. It’s clear that the company is under very real pressure to increase share prices following that meeting. Shareholders stated their confidence in the firm following the meeting. In other words, the company is going to implement strategies they suggested that the shareholders believe will increase value.
While Terran Orbital is a distressed company, it’s very clearly one that has a lot of potential to move upward in the immediate future.
On the date of publication, Alex Sirois 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.
