However hard the market slams a stock, there's always the chance it'll come bouncing right back. We'll consult our Motley Fool CAPS community to find shares on the rebound, examining one specific sector of the economy in search of companies with rising CAPS ratings.          

There are 37 stocks listed under "aerospace/defense" in the CAPS' screener, and more than a handful of them carry well-respected four- and five-star ratings. Those accolades mean our 170,000 CAPS members are confident that these stocks will beat the market in the months ahead, but let's see what members are saying about the ones below:


CAPS Rating
(out of 5)

Recent Price

52-Week Price Change

Est. 5-Year Growth Rate

AeroVironment (Nasdaq: AVAV) ***** $28.65 9% 20%
FLIR Systems (Nasdaq: FLIR) ***** $35.22 15% 15%
Honeywell (NYSE: HON) **** $61.23 29% 16%

Source: Motley Fool CAPS; Yahoo! Finance. NA = not available.

The markets have been on a roller-coaster ride lately. With the S&P 500 up almost 14% over last year, it might be surprising to learn that CAPS' aerospace/defense stocks haven't done as well, rising 9% in that same time span. So let's take a closer look at why investors think some of these other companies won't be jumping from the frying pan into the fire now that the markets are roiled again.

Some spring in its step
You'd think, with multiple wars being waged and "mission creep" perhaps seeping into Libyan operations, unmanned-drone maker AeroVironment would be flying high. Well, it was at one point, as shares flew at a lofty $35 each, but an experimental craft it was testing crashed and investors burned as they ran for the exits. What?! Considering the drone was testing "envelope expansion," meaning it was pushing the boundaries of what it could do, a mission mishap isn't exactly unexpected.

Yet it might be AeroVironment's nonmilitary technology that provides an even better opportunity for growth. It's partnered with NRG Energy (NYSE: NRG) to develop 70 charging stations in Texas featuring its electric vehicle charging tech. The charger market actually promises to be much larger than the vehicle market, with General Electric (NYSE: GE) estimating 2.2 chargers installed for every EV sold. That's why it's developing its own 35,000-strong chain of "WattStations" over the next few years.

Highly rated CAPS All-Star TMFEnochRoot says there are a number of ways to win with an AeroVironment investment:

Lots of ways to win here. Recovery from near term overreaction to the GlobalObserver crash should help n the near term. Takeout possibilities always provide upside, as small UAV is a growth area in an increasingly negative growth sector and the large defense primes have stated their interest. And the emerging electric vehicle charging business has a long attractive growth runway of its own. Tremendously strong balance sheet, talented management team, high ROIC business, just lots to like here.

Add AeroVironment to your watchlist to see if it takes flight again.

A pricey prescription
Thermal imaging systems manufacturer FLIR Systems saw revenues rise 30% last quarter, but that was actually less than what Wall Street had been hoping for. A slowdown in government procurements for its RAID program -- a combination of cameras and surveillance equipment positioned on towers and blimp-like dirigibles called aerostats -- kept sales in check, and rising costs led to lower profits than a year ago.

While government sales accounted for more than a third of FLIR's revenues in 2010, that's down from 43% the year before. Its commercial side should continue to rise in importance, and last quarter the division saw a 51% increase in revenues. Firefighting equipment from Mine Safety Appliances (NYSE: MSA) and readout integrated circuits for digital X-ray machines from Hologic (Nasdaq: HOLX) a couple of the nonmilitary uses of its technology.

CAPS member BKITU thinks it's only a matter of time before you and I are buying its products:

The company is aggressively opening markets with smaller and increasingly inexpensive products. It's only a matter of time before they hit the tipping point and average homeowners will start buying their products.

See through the fog and give us your thoughts on the FLIR Systems CAPS page.

A vital statistic
As CAPS member ruinas notes, the improving economy has benefited Honeywell's business, allowing its stock to go on a sure but steady climb higher. As the country's industrial base strengthened and manufacturing expanded, each of the company's segments did well with organic growth rising 11% in the first quarter. Still, like AeroVironment, decreased government spending offset otherwise strong OEM sales and higher aftermarket volumes.

With stronger first-quarter sales under its belt, Honeywell broadened its revenue and profit guidance for the year. You can add the diversified manufacturer to the Fool's free portfolio tracker and see whether it remains to be a honey of a deal.

The ball's in your court
There are many factors that go into whether a stock is a buy or sell, so it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Head over to CAPS today and share your thoughts with other investor analysts on whether you think these stocks are ready to bound higher.