Best Defense Stocks to Buy in 2026 and How to Invest in Them

Top eight defense stocks to consider

Let's look closer at these standout companies.

1. Lockheed Martin

General Dynamics (GD -0.29%) is one of two primary military shipbuilders and has a portfolio of tanks and land vehicles, making it one of the go-to vendors for the U.S. Army. General Dynamics also has one of the largest defense-focused information technology (IT) and services businesses, providing some revenue stability during periods when the Pentagon cuts back on equipment purchases.

Ship construction is complex, and individual vessels can take years to complete, leading to some quarter-to-quarter revenue volatility. General Dynamics tries to offset that choppiness via its more predictable IT business. Still, investors should be aware that the mix of businesses can make it difficult to predict quarterly results.

5. RTX

AeroVironment (AVAV +2.00%) is a leader in the drone business, developing a sophisticated line of small and medium-sized aircraft that have proven invaluable in the war in Ukraine. That conflict has been a proof-of-concept for AeroVironment, getting the company on the radar screen of military buyers at the Pentagon and with U.S. allies.

AeroVironment is still early in its growth cycle. In 2025, the company acquired BlueHalo to expand its presence in the markets for larger drones, autonomous water systems, and space technology.

How to invest in defense companies

1. Open your brokerage app: Log in to your brokerage account where you handle your investments.
2. Search for the stock: Enter the ticker or company name into the search bar to bring up the stock's trading page.
3. Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
4. Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
5. Submit your order: Confirm the details and submit your buy order.
6. Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.

Defense is becoming more electronic and data-driven

For most of its history, the defense industry's primary expertise was metal-bending. Only a few companies could build massive battleships, bombers, and tanks.

But in this sector, as in the rest of the world, value is increasingly going not to the companies forging the steel but to the ones providing the brains that go inside it. Defense electronics and cybersecurity are growing portions of almost every company's portfolio. It's where a lot of the internal investment is going.

Defense IT also remains a priority, with vendors scrambling to provide the Pentagon with secure networks and data-rich communications systems.

Will global conflicts move defense stocks?

Nightly headlines highlight global unrest, with the Russian invasion of Ukraine and the U.S.-Israel conflict with Iran. Defense stocks tend to move higher at the onset of a new conflict but rarely sustain those gains. Investors should understand that defense projects tend to have multiyear timetables that don't lend themselves to a quick revenue surge, even when demand is on the upswing.

Large defense contractors generate much better margins on research and development (R&D) into new advanced weapons systems than from selling one-off missiles or ammunition. If the U.S. government were to deemphasize research to fund active operations, the conflicts in Europe and the Middle East could hurt defense stocks. However, given the importance of research, that seems unlikely.

Longer term, the impact could be more substantial. These conflicts are likely to add to defense sales in the years to come through the replenishment of weapons sent to Ukraine and Israel, and as U.S. allies in Europe and elsewhere look to strengthen their military muscle.

How defense companies make money

Defense companies either make goods or provide services for the Pentagon and other U.S. government customers. Services can include running IT networks for government agencies or providing maintenance at military bases. Goods can include weapons, boats, planes, and spare parts.

The companies all rely on the U.S. and allied governments for their revenue, but each has its own specialty, and most focus on a handful of product groups. There is no one-stop shop for the Pentagon.

How to find the best defense stocks

The defense sector tends to be a stable group of companies with a few failures and a few standouts. Here are some tips for evaluating individual defense companies.

Listen to the customer

The Pentagon has an insatiable appetite for new equipment. But with aircraft carriers costing more than $10 billion and F-35 fighters priced at $100 million or more, the government can only buy so much. To identify the likely winners and losers, pay close attention to the budgeting process.

Early in the year, the Pentagon sends a funding request to Congress, which then holds hearings to discuss priorities and make final allocation choices throughout the spring and into the summer. An investor need not hang on every word. However, the budget request, available on the Pentagon's website, and commentary elsewhere can provide clues about which billion-dollar programs are administration priorities.

Follow the numbers

Companies often highlight massive contract awards in press releases without explaining that those big-dollar figures are often spread out over many years and may depend on Congress approving the funds. Pay attention to these metrics when evaluating defense stocks:

• Free cash flow: This is important for any business, but it can vary for defense contractors depending on whether their projects are new or well-established. Companies often spend more in the early stages of a production contract, temporarily depressing cash flow.
• Corporate backlogs: Investors should pay close attention to these, as they represent future contracts that have been awarded but not yet executed. How much of a backlog has been funded and how much must go through the congressional budgeting process can vary greatly.
• Book-to-bill ratio: This metric compares the value of orders received in a given quarter to the value billed in that quarter and indicates a company's growth potential. A growing company should have a book-to-bill ratio of at least 1.0, implying that orders for future products are being booked at a rate that equals or exceeds what is being shipped today.

Defense companies know investors are focused on these metrics and typically provide the relevant information in quarterly earnings reports or conference calls.

Benefits and risks of investing in defense stocks

There are pros and cons to investing in defense stocks. Here are some factors to consider before adding them to your portfolio.

Benefits

• Stable and predictable demand from a customer that invests in national security at all stages of the cycle.
• Long-term contracts give management teams strong revenue visibility, allowing for planning, and provide stability.
• High barriers to entry due to the specialized nature of the products and the difficulties of dealing with the government as a customer.
• A history of technological innovation that can translate outside of defense. From Velcro to the internet, many of the products we take for granted today originated either within or adjacent to the aerospace sector.

Risks

• Politics can be unpredictable, and changes in government priorities or a new administration can force management teams to rethink their long-term planning.
• Cost overruns are increasingly a problem for the contractor. If a company is not well run and does not keep its costs under control, it can eat into earnings.
• Supply chain chaos can lead to program delays. Large defense platforms rely on dozens of suppliers, each with layers of smaller vendors beneath it. An issue anywhere in that chain can lead to cost overruns or delays for the entire program.
• Ethical concerns are a common reason to avoid defense stocks. These companies make lethal weapons, and not all investors want that in their portfolio.

Key trends in the defense industry

Both age-old concerns and modern innovation shape the defense industry.

One key theme dominating the industry is the need to restock inventory. The U.S. weapons stockpile has been worn down, and many of the new contracts issued in 2026 will be more about replenishing old weapons than focusing on the new.

At the other end of the spectrum, defense innovation is evolving from a heavy industrial model to a more high-tech focus. No longer are the massive ships and planes the focus; rather, the electronics and sensors inside them are driving profit growth.

Are defense stocks right for your portfolio?

Defense companies manufacture lethal products and may support operations or intelligence-gathering that some find unsettling. Some investors don't want to support those activities and may avoid becoming shareholders in defense stocks.

Like many industrial stocks, defense stocks tend to be more plodding than high-flying technology or biotech stocks. But that also means they are less volatile than some sectors. Defense stocks are best suited for income-oriented investors seeking steady growth and rising dividends rather than immense valuation increases.

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