Investing in industrial stocks can be an excellent way to enjoy superior profits as a stock market investor, especially when conditions favour a particular sector. Sometimes, the factors contributing positively to an industry might not be the most fortunate. If you have ethical reservations when it comes to investing in defence companies, I’d suggest you reconsider reading this article.
If you are open to it, stocks of companies related to the defence sector have been having quite the year—strictly in terms of performance. Rising geopolitical tensions and significant funding from our neighbour down south have boosted companies related to militaries.
It is not a secret that defence companies profit during times of global unrest. We have seen it time and time again. Today, I will discuss three U.S. companies benefiting from ongoing global turmoil and a single ETF you can purchase to jump on the bandwagon to capture the growth.
General Dynamics
General Dynamics (NYSE: GD) is a US$77.28 billion market cap, Reston-headquartered aerospace and defence company, and one of the largest arms companies worldwide.
From manufacturing the M1 Abrams tank used by militaries in the U.S. and its allied countries to its advanced nuclear-powered submarines, General Dynamics produces all kinds of arms and military equipment used in virtually every conflict worldwide.
It also produces a range of armoured fighting vehicles that protect infantry and offer them great mobility during military deployments. Governments worldwide require the equipment General Dynamics produces, especially during higher geopolitical tensions. As of this writing, GD stock trades for US$281.68, up by almost 33% from its 52-week low, delivering rapid growth to investors benefiting from rising conflicts.
Lockheed Martin
Lockheed Martin (NYSE: LMT) is a name well-known to many worldwide. The US$110.89 billion American aerospace and defence manufacturer with global interests is known for the F-22 Raptor and F-35 Lightning II, two of the most technologically advanced stealth jets to exist and in use in combat worldwide right now.
Lockheed Martin also produces AGM-114 Hellfire missiles, which are precision-guided air-to-ground missiles used for precision-strike missions. The company also produces PAC-3 missiles, which are used in many modern missile defence systems, and the C-130 Hercules, a military transport craft used worldwide.
In light of recent conflicts, shares of Lockheed Martin stock have risen by 17.36% from 52-week lows. As of this writing, Lockheed Martin stock trades for US$462.16 per share.
RTX
RTX Corp. (NYSE: RTX), formerly and more popularly known as Raytheon Technologies before its merger with United Technologies, is the largest defence company in the world. The US$133.44 billion market capitalization Arlington-headquartered defence company produces a lot of the military equipment and technology used in all modern conflicts by top militaries.
Any modern military arsenal today is incomplete without the Tomahawk cruise missile and the Patriot air defence system, both of which are some of RTX’s most well-known products. RTX also produces the in-demand AMRAAM missiles, various laser-guided bombs, and a wide range of radar systems used for missile defence and surveillance.
The demand for its products has increased recently, leading to a 46.39% rise in its share prices from 52-week lows. As of this writing, it trades for US$100.37 per share.
Foolish takeaway
Investing in defence stocks might not be a good approach for those with ethical concerns about the human toll of conflicts. Regardless, defence stocks are rising just like any industry in favourable conditions. If you want one-ticket exposure to this industry’s growth right now, you can consider investing in iShares US Aerospace & Defense Index ETF (TSX: XAD).
XAD ETF is an exchange-traded fund (ETF) that tracks investments in the Dow Jones US Select Aerospace & Defense Index. The fund charges a 0.44% management expense ratio and invests in 34 companies in the industry, including General Dynamics, Lockheed Martin, and RTX.
Diversifying its assets across these three and other major defence companies allows investors to benefit from positive price movements while managing investment risk.
