The best defense stocks boast long-term programs as well as footholds in emerging priorities for the U.S. and its allies, while the Russia-Ukraine war drags on.
Russia-Ukraine War Impacts Defense Stocks
Defense stocks surged following Russia’s invasion of Ukraine on Feb. 24, 2022.
As that war persists and a nuclear threat grows, the U.S. in early February announced an additional $2.2 billion military aid package for Ukraine, taking the total it has given since the war’s start to more than $29.3 billion.
The U.S. is sending weapons such as the Lockheed Martin (LMT) Javelin anti-tank missiles and Raytheon (RTX) Stinger air-defense systems. They also include Stryker eight-wheeled armored vehicles, built by General Dynamics (GD).
European allies are also spending billions in weapons and military aid for Ukraine.
As the war approaches its one-year mark, the Ukraine war could mean continued big increases in military spending.
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Boeing (BA) is known for its commercial jets and it’s also a major player in the defense sector. Defense revenue totaled $23.16 billion in 2022, roughly 35% of Boeing’s overall revenue.
BA stock earns an IBD Composite Rating of 75, EPS Rating of 26 and RS Rating of 94, all out of a best-possible 99. A 94 RS Rating means that Boeing has outperformed 94% of all stocks in IBD’s database over the past year.
The relative strength line for this top defense stock rose through early January to a new high, according to MarketSmith analysis. A rising RS line shows that a stock is outperforming the S&P 500 index. That strength indicator has pulled back a bit since, but BA stock sits above a rising 21-day moving average as well as longer-term averages.
The rally for Boeing stock came after it forecast rising commercial jet deliveries.
In defense, Boeing makes the iconic B-52 bomber. Its legacy fighter jets, like the F/A-18 and F-15, have updates in the works.
Boeing is also building the T-7 Red Hawk trainer jets, the MQ-25 Stingray drone and the KC-46 tanker for the Air Force and Navy. Its P-8 Poseidon spy aircraft is proving popular with both the U.S. Navy and allied navies.
In the space realm, Boeing is building the Crew Space Transportation-100 Starliner, to ferry astronauts, as well as NASA’s Space Launch System, the most powerful rocket ever.
Both projects have seen major delays. By contrast, rival SpaceX has already sent up multiple operational crewed flights to the ISS.
Boeing’s EPS Rating is weighed down by recent challenges, due in large part to its commercial division.
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Heico (HEI) makes electronic equipment for the aviation, defense, space and other industries. Revenue totaled $2.208 billion in 2022.
HEI stock carries a Composite Rating of 92, EPS Rating of 81 and RS Rating of 88. The defense stock cleared a 165.89 flat-base buy point Jan. 23. It has moved just beyond the 5% chase zone, which goes goes to 174.18.
Among other things, Heico makes aircraft replacement parts, all the way from the engine to brakes and wheels. The defense contractor also produces aviation systems and components.
The Florida-based company also taps other markets, such as medical and automotives.
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Howmet Aerospace (HWM) generated $5.663 billion in 2022 sales. HWM stock jumped on earnings Feb. 14. It bears a Composite Rating of 95, EPS Rating of 74 and RS Rating of 90.
The Pittsburgh-based company supplies the Lockheed-made, fifth-generation F-35 stealth fighter jets.
It provides the forged aluminum and titanium bulkheads. Howmet also supplies the titanium for other airframe structures.
To propel the powerful F-35 engine, Howmet Aerospace supplies superalloy blades and vanes. More broadly in defense, it provides parts for fluid management systems, radars and other defense systems.
In addition, Howmet taps the commercial aerospace market for customers like Boeing.
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Teledyne Technologies (TDY) generated $5.459 billion in 2022 sales.
TDY stock earns a Composite Rating of 90, EPS Rating of 90 and RS Rating of 80.
In defense and aerospace, Teledyne provides sophisticated electronic components, including data acquisition, communications equipment and avionics systems.
The California-based company also taps other markets, such as deep sea exploration and X-ray imaging.
Hexcel (HXL) generated $1.578 billion in 2022 sales. HXL stock holds a Composite Rating of 97, EPS Rating of 79 and RS Rating of 92.
The aerospace and defense contractor has seen its RS line rise steadily over the past year to a new high.
Based in Stamford, Conn.-based, Hexcel supplies adhesives and composites for more than 100 military aircraft and space programs. Those include the Lockheed Martin F-35, the Boeing Hornet and the Eurofighter Typhoon.
Hexcel also supplies commercial aircraft like the Boeing 737 Max and 787 Dreamliner. It is a leader in producing advanced composites for helicopter blades, including carbon fiber.
In space applications, advanced composites are used for rocket booster cases and payload doors for launch vehicles, the company says. They are also used in solar arrays for military and commercial satellites.
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