2026 rewarded investors who bought military suppliers. Lockheed Martin (LMT) is up by 10.3% YTD and RTX (RTX) is up by 6.6%
Northrop Grumman (NOC) returned -6.8% so far. However, as Q4 approaches, the U.S. war with Iran and the conflict in the Middle East might increase demand for munitions.
According to a report from the Lead Inspector General of the Department of Defense (War), the government spent $33.4 billion in four months as of June 29. Munitions cost $22.3 billion. The heavy use of munitions resulted in a strategic inventory shortfall. To replenish that, the U.S. will need to resolve industrial base bottlenecks related to munitions resupply efforts.
Iran either destroyed or damaged many U.S. aircraft. That included four F-15E fighter jets supplied by Boeing (BA), an F-35A from Lockheed, and an A-10.
Investors might consider buying LMT, RTX, and NOC shares amid their weak recent performance. Conversely, speculators avoided AeroVironment (AVAV). Bears hold a 11.3% short interest in AVAV stock. They are also avoiding Ondas (ONDS), Kratos Defense (KTOS), and L3Harris Technologies (LHX).
LHX stock closed at $249.66, 2.0% above its 52-week low. The company has leadership risks ahead after it changed its management. However, the firm has a book-to-bill ratio above one. That should support revenue growth at a high single-digit rate.
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