Top defense stocks make and distribute military equipment, technology, and services. The sector is sensitive to geopolitical tensions, changes in federal military spending, and the advent of military conflicts. Despite underperforming the broader stock market in 2023, the current war between Israel and Hamas, along with a healthy 2024 National Defense Authorization Act, could be a catalyst for purchases in the months ahead. Indeed, the Congress and the Biden administration have budgeted $842 billion for military spending next year, an increase of $26 billion over 2023 levels and $100 billion more than 2022, which doesn't include supplemental bills that could pass increasing military spending for aid to Ukraine and Israel.

Investors can monitor the sector's performance through the iShares U.S. Aerospace & Defense ETF (ITA), which acts as a proxy exchange-traded fund that holds a portfolio of industry bellwethers like the Boeing Company (BA), Lockheed Martin Corporation (LMT), and General Dynamics Corporation (GD). The fund has returned 7% over the past year, trailing the broad-based 澳洲幸运5开奖号码历史查询:Russell 1000 index by 8.6% over the same period.

Below, we highlight the top defense stocks for the fourth quarter with the best value, the highest growth potential, and the most moment♏um. All figures are as of Nov. 24, 2023.

Best Value Defense Stocks

The defense stocks displayed in the table below have the lowest 12-month trailing 澳洲幸运5开奖号码历史查询:price-to-earnings (P/E) ratio. This widely used metric assesses a stock's value by comparing its market price with its 澳洲幸运5开奖号码历史查询:earnings per share (EPS). It reflects how much investors are willing to pay for each dollar of earnings. Typically, a high P/E ratio suggests a company may be overvalued, while a low P/E could indicate undervaluation. Investors compare the stock's relative attractiveness to industry peers and the potential for future growth.

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• Bombardier Inc.: The Canadian company makes business aircraft and structural components across the globe. In October, the jet maker's defense division delivered a seventh Global 6000 aircraft to the U.S. Air Force for its battlefield airborne communications node program.
  
• CPI Aerostructures, Inc.: The company makes structural aircraft parts for fixed-wing aircraft and helicopters in the commercial and defense markets. It also operates as a contractor and subcontractor for the U.S. Department of Defense and commercial contractors. Last month, it received orders totaling $9.6 million from the U.S. Air Force for T-38 aircraft modification kits.
• Colt CZ Group SE: The firm produces, buys, and sells firearms, ammunition, and tactical accessories globally, including ballistic vests, helmets, and other protection products. In June, Colt said it acquired Swiss ammunition producer swissAA Holding AG but did not disclose the transaction price.
  

Defense Stocks With Most Growth Potential

The defense stocks below have the lowest 12-month trailing 澳洲幸运5开奖号码历史查询:return-on-equity (ROE) ratio. This metric accounts for a company's profitability and efficiency by evaluating its net income relative to shareholders' equity. Given as a percentage, it signifies the return generated on each dollar of equity investment. A ꧟higher ROE generally indicates the effective use of shareholder funds and prudent financial management, a marker of a company we🥂ll-positioned for growth.

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• Lockheed Martin Corporation: The company designs, makes, and integrates defense technology systems, products, and services worldwide. It operates through four segments: aeronautics, missiles and fire control, rotary and mission systems, and space. The defense giant recently opened a $16.5 million, 25,000-square-foot missile defense lab.
  
• Airbus SE: Airbus designs and makes aerospace products and services across the world through three divisions: Airbus, Airbus Helicopters, and Airbus Defence and Space. In November, Emirates, the Dubai-based airline, signed an order for 15 A350-900 jets, taking its total order to 65 aircraft.
  
• Northrop Grumman Corporation: The aerospace and defense company makes and distributes everything from autonomous aircraft systems to vertical takeoff and landing tactical ISR systems to weapons and equipment. In October, the Republic of Korea signed an order for Northrop Grumman to provide an airborne laser mine detection system for its Korean Mine Countermeasures Helicopter program.
  

Defense Stocks with the Most Momentum

The defense stocks below generated the highest total return over the past 12 months. Momentum investors believe that the factors leading to a stock outperforming its peers will likely remain, generating further 澳洲幸运5开奖号码历史查询:market-beating returns.

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• Rolls-Royce Holdings plc: The industrial technology company operates through four segments: civil aerospace, defense, power systems, and new markets. Its defense division makes and sells military engines, naval engines, and submarine nuclear power plants, and provides aftermarket services. The aircraft engine maker said in September that it expects to complete initial F130 engine testing for the U.S. Air Force B-52J Stratofortress by the end of the year.
• Archer Aviation Inc.: Archer designs, makes, and operates electric vertical takeoff and landing aircraft for carrying passengers. The company recently inked a $500 million deal with the private helicopter firm Air Chateau International DWC LLC for 100 Midnight eVTOL aircraft, with $4 million in additional pre-delivery payments.
  
• Environmental Tectonics Corporation: The engineering company's aerospace segment designs, makes, and markets aircrew training systems for commercial and military defense agencies. Earlier this year, the defense equipment producer was awarded an $85 million contract for delivering an aeromedical center, which included a tactical flight simulator, altitude chamber, and night vision goggle training system.

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