Three defense stocks worth buying after President Trump’s talks with Russia’s President Vladimir Putin and European leaders who have yet to agree to a ceasefire of a plan for peace.
Europe is expected to keep stepping up defense spending further amid Russia’s continuing invasion of neighboring Ukraine and threats directed at other European nations. NATO recently agreed to boost spending to 5% of GDP by 2035 per member nation, with a floor of 3.5% earmarked for “core military needs,” more than doubling the previous 2% target set in 2014.
NATO’s plan for increased military spending is reminiscent of President Reagan’s administration when he championed more than doubling the U.S. military budget from under $150 billion in 1980 to $300 billion-plus by 1985. Military spending is increasing further in America, with the U.S. Treasury monthly data last week showing that the U.S. Department of Defense (DoD) operations-and-maintenance (O&M) spending rose 1% year-over-year in July, following a 2% increase in the second quarter.
DoD research and development (R&D) spending jumped 9% year-over-year, following a 1% dip in the second quarter. Procurement spending jumped 7%, following a 6% increase in the second quarter.
Total spending for the same DoD accounts increased 4% from July 2024, following a 2% gain in the second quarter. The 4% July jump compared with a 17% rise in July 2024 but showed no increase from July 2023, reported the Chicago-based investment firm William Blair & Co.
Three Defense Stocks Worth Buying After President Trump’s Talks: PLTR
Denver-based Palantir Technologies (NASDAQ: PLTR) is a software company that operates largely outside of the recent tariff fallout and recently announced a deal with NATO to supply it with the company’s Maven AI software. The stock has been recommended in TNT Trader profitably this year and still is showing strong momentum.
Mark Skousen leads the TNT Trader advisory service and Forecasts & Strategies.
The stock also is strongly recommended in the Investing Edge newsletter led by Jim Woods, a former Army paratrooper. Palantir has soared 108.58% so far this year and even rose when the market dipped.
Paul Dykewicz meets with Jim Woods, who heads Investing Edge and Bullseye Stock Trader.
Three Defense Stocks Worth Buying After President Trump’s Talks: Palantir’s Power
Palantir’s partnership with the U.S. Army began in 2008 to design and deploy modern mission software with improved capabilities. The company’s solutions are used in nearly every Army mission, ensuring data is accessible for fast decision-making that allows the warfighter to out-think and out-pace the adversary, Palantir officials said.
Palantir seeks to operate as the “connective tissue” between Army personnel, data and resources by delivering critical information to the key decision-makers when needed, company officials stated. Its technology enhances the preparedness of soldiers who use wearable sensor and mobile technologies in the battlefield.
But the huge amount of data produced risks overwhelming both the individual soldiers and the battlefield decision-makers who lead them. Palantir tries to harness hardware solutions, reduce system complexity and provide improved human-machine interfaces to aid soldiers in the field and commanders at a forward-operating base (FOB). Situational awareness powered by visual augmentation, sensor optimization and secure capabilities helps to reduce cognitive challenges, as well as to protect and to connect warfighters.
Those who recall the U.S. special forces locating al-Qaeda founder Osama bin Laden‘s compound in Abbottabad, Pakistan, where he was killed on May 2, 2011, may appreciate knowing that a Palantir software product called “Gotham” was rumored to have been used by counterterrorism analysts at U.S. government agencies to integrate and analyze data. The information could have included intelligence reports, surveillance and reconnaissance.
Before Woods launched the Investing Edge newsletter early in 2025, he served as a former Army officer and combat veteran who tracks the defense industry closely. When it comes to military operations, aggression, manpower and firepower still require the right intelligence to win battles, Woods said. Palantir is a star performer in the Top 10 Growth Accelerators portfolio of Investing Edge.
“What Palantir does so well is provide the right intel,” Woods continued.
Intelligent ground systems are at the heart of the Army’s realization of a multi-domain operations concept, according to Palantir. The company’s goal is to empower commanders to make sense of a complex battlefield, requiring ground systems to aid understanding.
Chart courtesy of www.stockcharts.com
Three Defense Stocks Worth Buying After President Trump’s Talks: LMT
Lockheed Martin (NYSE: LMT), of Bethesda, Maryland, is a defense and aerospace company created from a 1995 combination between Lockheed Corporation and Martin Marietta Materials, Inc. In its current form, Lockheed Martin focuses on defense, space, intelligence, homeland security and information technology. LMT is another Citi Research buy.
The company’s key business segments are Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. Lockheed Martin’s management recently laid out the case that margins are likely to trough in 2024 and drift toward 11%-plus over time, driven largely by product mix.
The loss-making classified contract at Lockheed Martin’s MFC business will be a tailwind in 2025, i.e., lower forward loss charges, while the rest of the margin accretive MFC portfolio is likely to grow faster than the remainder of the company. Further, new awards across the company better reflect the current cost environment and should produce margins higher than pre-pandemic backlog, according to a Citi Research note.
Chart courtesy of www.stockcharts.com
“Defense will continue to be a big business,” said Michelle Connell, who heads Portia Capital Managment in Dallas. Connell is recommending Lockheed as a buy and the President’s May 20 announcement about the golden dome is one of her reasons.
According to the Stockholm International Peace Research Institute, (SIPRI), 2024 world military expenditures reached $2718 billion. That’s an increase of 9.4% from 2023 and the largest year over year increase since the end of the Cold War. Military spending is increasing globally, but most especially in Europe and the Middle East.
For context, for the current year, the United States has budgeted $895 billion. Second runner-up is China with $267 billion. 3rd runner-up is Russia with $126 billion.
Given the above backdrop, investing in the defense sector has a high probability that it will continue to be profitable, Connell said. This year, LMT made it clear that they are going to target increasing their growth in Europe, he added.
Michelle Connell heads Portia Capital Managment
When Lockheed reported its second-quarter earnings on July 22, the company took one-time charges of $1.6 billion. Investors are not happy about LMT’s recent performance and announcements. After the report, the stock declined by 5%. Year to date, LMT is down over 8%.
“However, I’m encouraged that the company has cleaned house and now can focus on what it does best — missiles and the F 35,” Connell said.
LMT’s defense missile business should benefit from the recently announced Golden Dome project. After the company’s earnings release, it announced an $111 million Trident II missile deal with the Navy. During the earnings conference call, its management expressed confidence in the F-35 program and planned delivery of its fighter jets. LMT’s leaders also maintained their fiscal year free cash flow target of $6.7 billion.
LMT has been a consistent dividend payer and currently has a 3% yield. Over the last 10 years, the company’s dividend payout has increased 8.2% on an annual basis.
Three Defense Stocks Worth Buying After President Trump’s Talks: BAE
London-based BAE Systems PLC (OTCMKTS: BAESY) is a multinational arms, security and aerospace company that should benefit from NATO nations’ commitment to more than double spending in the next decade. Due to Europe’s rearmament cycle, Wall Street analysts have lifted their average defense stock target prices by 25%, Connell counseled.
Many European countries have publicly declared their increase in defense spending. Those countries include Denmark, the United Kingdom and Germany.
“Due to a lag in contract negotiations and earnings’ revisions, the full potential of these names may not be realized until at least six months from now, Connell continued.
The investment firm JP Morgan wrote in a research note that it expects revenue estimates to increase by at least 10% for these EU defense companies. One of the EU sovereign funds is removing its prohibition of investments in defense companies, Connell commented. A European politician questioned how governments can increase defense spending, but their sovereign funds are not allowed to invest further in these companies.
“In February 2024, BAE acquired Ball Aerospace to add to its space mission product line,” Connell continued. “These synergies should assist BAE in reaching its 10% sales growth target starting this year.”
On July 1, BAE announced the second tranche of its 1.5 billion pound share buyback. The first tranche, initiated in 2023, totaled 500 million British pounds. The second tranche of 500 million pounds is slated for completion by June 2026. That will leave one additional tranche of 500 million pounds for the future.
“This repurchase program increases BAE’s opportunity for share appreciation,” Connell said.
Chart courtesy of www.stockcharts.com
Three Defense Stocks Worth Buying After President Trump’s Talks: Geopolitical Risk Remains
Geopolitical risk remains high, despite President Trump meeting for several hours with President Putin in Alaska on Friday, Aug. 15. That failed to result in a ceasefire or a peace agreement, and neither did follow-up talks on Monday, Aug. 18, during White House meetings between President Trump, Ukraine’s President Volodymyr Zelenskyy and key European leaders.
An unanswered question is whether Putin is prepared to sit down face-to-face to negotiate an end to his three-plus-year invasion of Ukraine. With no peace immediately at hand, military spending seems destined to keep rising for the foreseeable future.
Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also 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 book is great as a gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others. Call 202-677-4457 for multiple-book pricing.
