Three Defense Investments to Purchase Amid Continuing Wars

Three defense investments to purchase amid continuing wars offer opportunities to profit despite economic uncertainty arising from President Trump’s threats or actions to apply tariffs to U.S. trade partners.

The three defense investments to purchase amid continuing wars have been given a boost by Europe’s increased spending on military equipment. Two are defense and aerospace companies, while the third is exchange-traded fund (ETF) that includes about half non-U.S. stocks.

President Trump’s tactics of assessing tariffs to reduce trade imbalances, along with talk about wanting allies to fund their own defense rather than depend on the United States to backstop them, have aided share price gains of European companies in 2025.

Catalysts ahead for next year or so for aerospace and defense stocks include: 1) the passage of the FY25 budget, 2) the introduction and passage of the FY26 budget, and 3) award announcements from both the US and its European allies, wrote Jason Gursky, an aerospace and defense analyst with Citi Research. In a recent research note, Gursky asserted that all three catalysts are likely to support mid-single-digit-percentage growth. That compares favorably to the -1% to +1% currently being priced into the stocks. he added.

“We recognize this view will require patience, with headlines often losing sight of the long-term fundamentals of the industry,” Gursky continued. “And the inability of Congress to pass spending bills in a methodical manner can create volatility. But so long as the threat environment remains elevated, and the United States plans to continue its leadership role in the world – either as the lone superpower or as a power in a multi-polar world – we expect defense spending to remain robust and for defense company stocks to perform well from current levels.”

Three Defense Investments to Purchase Amid Continuing Wars: BAE

London-based BAE Systems plc (OTCMKTS: BAESY), an aerospace, defense and information security company, has boosted its dividend payout for 21 consecutive years and further enhanced share-price valuation by buying back shares. BAE has reported 2024 earnings per share (EPS) that is 3% ahead of consensus analysts’ estimates.

The DAX Index in Germany is up 16.8% so far this year, with the London Stock Exchange’s FTSE 100 rising 6.01%, compared to a dip of 1.78% for the S&P 500. Defense stocks are among the market leaders in Europe due to U.S. President Donald Trump calling for those countries to start funding an increasing amount of their own defense, rather than relying on the United States to protect them.

Germany, as Europe’s largest economy, is setting an example with its Chancellor-in-waiting Friedrich Merz vowing that his government will do “whatever it takes” to support Ukraine to fend off Russia’s invasion of its neighboring nation that has gone on for three-plus years. He has proposed amending Germany’s constitution to exempt defense spending from the country’s strict fiscal constraints.

Germany’s Rheinmetall AG (RHM.DE), a major supplier of armored vehicles and artillery systems, has soared 113.58% so far this year. Among Europe’s other defense giants, France’s Thales S.A. (HO.PA) rocketed 79.01% so far in 2025, while Italy’s Leonardo S.p.a. (LDO.MI) has climbed 74.55%.

Chart courtesy of www.stockcharts.com

Three Defense Investments to Purchase Amid Continuing Wars: Connell’s Call

“BAE makes the most sense to me due to it’s large and technically proficient defense portfolio,” said Michelle Connell, founder and chief investment officer of Dallas-based Portia Capital Management, LLC.

With investment markets potentially having further downside in the near term, Connell suggested that investors use a dollar-cost averaging strategy. That approach involves investing a fixed amount of money at regular intervals, regardless of the market’s fluctuations, to buy additional shares when prices are low and fewer when prices are high. The intent is to reduce the average cost per share.

JPMorgan described BAE as a good “long term holding,” but also advised not to chase the stock at lofty levels. The European defense stocks have pulled back slightly in the last week or so and may retreat further, Connell cautioned.

Another way to invest in BAE Systems and the other European defense stocks is through exchange-traded funds (ETFs), Connell counseled. She suggested buying a basket of quality defense companies in a fund and letting the most successful companies propel the performance.

With an uncertain outlook in the U.S. market and government spending cuts under President Trump, U.K. and European defense funding could offer a superior opportunity, according to JPMorgan.

BAE is a uniquely diversified defense company, by geography and products, according to a recent JPMorgan research report.

Three Defense Investments to Purchase Amid Continuing Wars: HWM

Howmet Aerospace (NYSE: HWM) is an advanced engineering company in Pittsburgh that is not as well known as giant U.S. aerospace and defense companies. But it offers some critical components in the F-35 joint strike fighter that hits Mach 1.6 under the thrust of possibly the most advanced engine on earth.

The joint strike fighter is built with cutting-edge materials, integrated airframe design and next-generation avionics to enable this fifth-generation fighter jet to operate with potentially unprecedented stealth, speed and agility in air-to-air and air-to-ground combat, company officials said.

In developing this complex fighter jet, Lockheed Martin (NYSE: LMT) turned to Howmet to provide key parts that include single-piece, forged aluminum bulkheads that form the backbone of the aircraft structure and save 300 to 400 pounds per jet, while cutting costs by 20%. The fighter jet also has titanium bulkheads and uses titanium to manufacture other airframe structures for all three F-35 JSF variants. Howmet further supplies single-crystal, nickel-based super alloy blades and vanes that operate in environments hotter than the melting point of the metal to propel the engine.

A seasoned stock picker who likes Howmet Aerospace as a buy recommendation is Jim Woods, who heads the Investing Edge newsletter that has the stock in its Top 10 Growth Accelerators portfolio. Howmet Aerospace is the top-performing pick in the Top 10 Growth Accelerators portfolio of Investing Edge.

As a former Army paratrooper, Woods has a keen interest in defense issues and follows them closely for his Investing Edge and advisory service subscribers.

Jim Woods heads the Investing Edge newsletter and Bullseye Stock Trader.

Howmet Aerospace is up 25.92 year to date through the close of trading on Tuesday, March 25.
Woods also recommended Howmet as a stock in his Bullseye Stock Trader advisory service during February 2025. Despite the market’s slippage in recent weeks, the related calls options he advised his Bullseye Stock Trader subscribers to buy are up by double-digit percentages.

Chart courtesy of www.stockcharts.com

Three Defense Investments to Purchase Amid Continuing Wars: SHLD

As many European governments aim to increase defense spending, they likely will favor non-U.S. companies for their contracts, said Bob Carlson, who heads the Retirement Watch investment newsletter and offers an IRA Calculator, a proprietary service that calculates whether a traditional IRA should be converted into a Roth IRA. It looks like U.S. companies aren’t going to benefit much from the higher non-U.S. defense spending, Carlson counseled.

Retirement Watch leader Bob Carlson talks to Paul Dykewicz

Investors might want to consider Global X Defense Tech (SHLD), which has only 54% of its portfolio in U.S.-based companies, Carlson counseled. The portfolio maintains a cost advantage over competitors, priced within the lowest fee quintile among its peer funds.

SHLD offers a current dividend yield of 0.69%, aside from its low fees. The fund also has showed share price strength amid recent market pullbacks.

Germany’s Rheinmetall AG (OTCMKTS: RNMBY) is the biggest holding in SHLD, with a 9.03% weighting. Next are Palantir Technologies Inc. (NASDAQ: PLTR), 8.49%, and RTX Corp. (NYSE: RTX), 7.41%.

Chart courtesy of www.stockcharts.com

Three Defense Investments to Purchase Amid Continuing Wars: Summary

The defense investments to purchase amid continuing wars offer the potential to outperform the market. The market’s recent pullback propelled significantly by President Trump’s tariffs could give bargain-hunting investors a chance to purchase shares of these investments with projected gains ahead.

Paul Dykewicz, www.pauldykewicz.com, is an award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at StockInvestor.com and DividendInvestor.com. He also serves as editorial director of Eagle Financial Publications in Washington, D.C. In that role, he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other reports. Previously, Paul served as business editor and a columnist at Baltimore’s Daily Record newspaper and as a reporter at the Baltimore Business Journal. Plus, Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many other sports figures. To buy signed and specially dedicated copies, call 202-677-4457.