The benchmark S&P Aerospace & Defense Select Industry Index’s year-to-date return for 2025 is reported as 24.3%. Even more astonishing is that the index has basically been flat (down 2%) over the past month.
Just think about what’s happened over that month: a commitment from NATO members to massively boost defense spending, fighting between Israel and Iran and the U.S. bombing of Iran’s nuclear sites in late June.
Wall Street traders and analysts are convinced all this turmoil will translate into big gains for defense stocks, sooner rather than later.
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“Recent events, including the conflicts in Iran and Ukraine and the U.S. defense budget’s surpassing $1 trillion for the first time,” said Allspring Equity Teams & Investment Analytics Team in comments to Benzinga. “The scenario reinforces our team’s fundamental view that: 1) defense spending is a growing budget priority in the U.S. and globally and 2) military superiority is being rapidly redefined by technology.”
The Allspring Team also believes that any rise in defense stocks should also help the larger market.
“In the event of escalation, energy and defense stocks may provide a hedge against other segments of the equity market that might be more challenged,” the firm noted.
Additionally, spending in the global defense sector is expected to reach $2.5 trillion by 2025, surpassing the previous record set in 2024.
“One key reason for the increase is the continuing war between Russia and Ukraine, which has resulted in increased defense spending by both the European Union and the United States,” said Andrew Prochnow, analyst-at-large at Tastylive, a streaming platform geared towards options traders. “Rising tensions in the Middle East have also contributed to this trend.”
These conflicts have clearly boosted stocks in the sector, as evidenced by the rally in the iShares US Aerospace & Defense ETF (BATS:ITA). “The fund has surged by more than 25% year-to-date, and 40% over the last 52 weeks,” Prochnow noted.
With defense stocks in play right now, which standout companies make the most sense for investors? While every market maven’s portfolio goals and strategies are unique, here are three sector stocks that should provide some upbeat returns for investors through the rest of 2025, if not beyond.
Howmet Aerospace
Pittsburgh, PA-based aerospace and defense firm Howmet Aerospace (NYSE:HWM) has experienced a 9% increase in commercial sector growth and a 19% rise in defense aerospace revenues in the first quarter of 2025. Both trends, particularly the latter, are expected to continue for the rest of the year.
HWM has some big-name customers, including Boeing (NYSE:BA), which uses Howmet’s parts for its once again rising 737 Max Aircraft. Lockheed Martin (NYSE:LMT) also collaborates with Howmet on its F-35 Lightning fighter jets, with orders for engine spares accumulating. With 143 A-plus rated mutual funds stashing shares of HWM and eight straight quarters of increased fund ownership, take a page out of the fund manager playbook and consider adding Howmet to your portfolio.
RTX Corp.
RTX Corp. (NYSE:RTX), an Arlington, Virginia-based aerospace and defense company, is increasingly popping up on Wall Street charts at the moment.
“We bought RTX right around the inauguration of this administration, so we have a 12% return on our holding,” said Alexander Cook, portfolio manager at Optimist Capital.
RTX is a large, broad-based entity encompassing Collins Aerospace, Pratt & Whitney and Raytheon, which suits Cook just fine. “We like investments like these even outside of heightened risks,” he said. “RTX is a large cap dividend payer and more insulated when markets get overly frothy, we expect to see another 10% on this one over the next 6-9 months.”
CrowdStrike Holdings Inc.
Cybersecurity plays a crucial role in government and defense, particularly in safeguarding highly sensitive data, both during times of war and in times of peace. CrowdStrike’s (NASDAQ:CRWD) stock price is $513 per share, but it’s holding its value, trading up 50% year-to-date. Citing CRWD’s highly effective AI deployment in key cybersecurity areas, such as cloud, identity and log-scale domains, Wedbush Securities recently boosted the company’s price target to $575.
“Defense technology is going to be the best pure growth play going forward,” Cook said. “In a modern first-world scenario, boots on the ground are just not realistic.” He advises investors to view cybersecurity as the new defense. “Cybersecurity is all about protecting technology and looking for weaknesses in opposing entities rather than building missiles.”
Editorial content from our expert contributors is intended to be information for the general public and not individualized investment advice. Editors/contributors are presenting their individual opinions and strategies, which are neither expressly nor impliedly approved or endorsed by Benzinga.
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