3 Defence Stocks to Consider for May 2023

Lockheed Martin, L3 Harris, and General Dynamics are three defence stocks with significant upside potential.

| More on:
bulb idea thinking

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

When Russia invaded Ukraine in February 2022, the paradigm for investing in defence stocks shifted dramatically. The newly proposed fiscal 2024 Department of Defense budget by US President Joe Biden calls for $842 billion in discretionary DoD spending, a 3.2% increase over 2023 levels. According to Bank of America analyst Ronald Epstein, DoD discretionary spending would exceed $1 trillion by fiscal 2026, offering significant potential for the military industry.

Defence stocks are appealing investments during economic downturns because they frequently have dependable, long-term contracts.

Here are three defence stocks to purchase that have significant upside potential. 

Lockheed Martin Corporation

Lockheed Martin Corporation (NYSE:LMT), headquartered just outside of Washington, D.C., is one of the world’s largest defence enterprises. Its operations are divided into four categories: aeronautics, missiles and fire control, rotary and mission systems, and space. The fighter jet market leader makes the F-35 fighter jet, the most costly plane in the world. 

The defence firm has long-term contracts with its largest customer, the US government, which accounts for 74% of its sales. Along with the F-35 fighter plane, LMT has six missile development programs and one classified development program that are expected to enter production between 2023 and 2026. 

Some investors may be concerned about Lockheed’s reliance on a single major customer. It operates, however, mostly on a contract basis and now has about $150 billion in backlogged orders. LMT, with its diversified business, could be a solid long-term defence stock. 

Created with Highcharts 11.4.3Lockheed Martin PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

L3Harris Technologies Inc.

In 2019, L3Harris Technologies Inc. (NYSE:LHX) was founded by the merging of L3 Technologies and Harris Corporation. It is the sixth largest defence contractor in the United States, with four business segments: integrated mission systems, space and airborne systems, communication systems, and aviation systems. 

C6ISR systems and goods, wireless equipment, avionics, tactical radios, electronic systems, night vision equipment, and surveillance solutions are all manufactured by the firm, which is headquartered in Florida. Its products are primarily employed by US government defence agencies, but it also has a developing commercial sector. 

The expansion of the century-old defence leader stalled in 2021, with revenues falling slightly short of the previous year due to supply chain difficulties and contract delays. Despite this, it was awarded a five-year contract worth approximately $500 million to supply tactical jamming pods to the United States Army. Since its inception in 2019, it has boosted dividend payments year after year, making it a good income stock in the defence sector. 

Created with Highcharts 11.4.3L3Harris Technologies PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

General Dynamics

General Dynamics (NYSE:GD) is a Virginia-based American defence and aerospace business. It is the third-largest defence contractor in the United States and the third-largest defence contractor in the world in terms of sales. One of the major defence shipbuilding corporations, the US Navy gave it a $9.6 billion contract to build the first Columbia-class submarine. 

Aerospace, combat systems, information technology, and marine systems are its four business segments. Gulfstream Aerospace, a private jet designer and builder, is part of its aerospace division. Its combat systems section provides the US government with vehicles, weapons systems, and ammunition. 

The company’s technology division creates services to support programs for a wide range of military, government, and municipal customers. While GD profits from government contracts, its diverse product offerings mean it is not as dependant on them as other companies on our list, making it a viable option in the defence industry. 

Created with Highcharts 11.4.3General Dynamics PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Should you invest $1,000 in Metro right now?

Before you buy stock in Metro, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Metro wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $18,391.46!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 35 percentage points since 2013*.

See the Top Stocks * Returns as of 1/7/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Stephanie Chateauneuf has no position in any of the stocks mentioned. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.

If You Thought Apple and Microsoft Were Big, You Need to Read This.

The steel industry produced the world's first $1 billion company in 1901, and it wasn't until 117 years later that technology giant Apple became the first-ever company to reach a $1 trillion valuation.

But what if I told you artificial intelligence (AI) is about to accelerate the pace of value creation? AI has the potential to produce several trillion-dollar companies in the future, and The Motley Fool is watching one very closely right now.

Don't fumble this potential wealth-building opportunity by navigating it alone. The Motley Fool has a proven track record of picking revolutionary growth stocks early, from Netflix to Amazon, so become a premium member today.

See the 'AI Supercycle' Stock

More on Tech Stocks

how to save money
Tech Stocks

The Smartest Growth Stock to Buy Right Away With $5,000

If you want a growth stock, you want a company that has a stable path forward. So, let's look into…

Read more »

dividends grow over time
Dividend Stocks

These 3 Canadian Stocks Could Triple in 5 Years

These three Canadian stocks are in a prime position for future growth. But some patience may be needed along the…

Read more »

Data center servers IT workers
Tech Stocks

1 Canadian Stock Ready to Rise in 2025

This Canadian stock is ready to surge in 2025, and now is the time to buy.

Read more »

chip with the letters "AI" on it
Tech Stocks

2 Top Canadian AI Stocks to Buy in January

Here's why Kinaxis (TSX:KXS) and Docebo (TSX:DCBO) look like two top Canadian AI stocks worth buying to kick off 2025.

Read more »

cryptocurrency, crypto, blockcahin
Tech Stocks

Earn an 11% Yield With This Bitcoin-Focused ETF

This ETF converts the high volatility of Bitcoin into above-average monthly income.

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Tech Stocks

3 Growth Stocks That Could Skyrocket in 2025 and Beyond

Are you wondering what stocks could skyrocket in 2025? Here are some ideas on picking long-term winners for your portfolio.

Read more »

data center server racks glow with light
Tech Stocks

Where Will Constellation Software Stock Be in 10 Years?

Constellation Software (TSX:CSU) stock still looks way too cheap after pulling back further.

Read more »

how to save money
Tech Stocks

3 Reasons to Buy Shopify Stock Like There’s No Tomorrow

Here are three reasons why Shopify (TSX:SHOP) still looks like a solid buy in this current environment.

Read more »