Defense Spending Is Rising—Here Are 3 Stocks Built for Turbulent Times

Key Points

• The Trump administration announced plans to increase defense spending to $1.5 trillion in 2027, up from $900 billion in 2026.
• In an increasingly uncertain world, investors are turning to safe havens like precious metals, but defense stocks can also be good investments while the global picture becomes volatile.
• These three large-cap stocks are well-positioned to profit from an increased Pentagon budget and geopolitical uncertainty.

We’re only three weeks into 2026, but it already feels like Billy Joel can add another verse to We Didn’t Start the Fire: 

Ukraine/Russia tensions boil,

U.S. wants Caracas oil.

Massive protests in Iran,

President Trump threatens Greenland.

It's an uncertain time, which is why you’re seeing safe-haven assets like gold and silver make new all-time highs. But in turbulent times, defense stocks can also be a safe place for capital to hide, and this fact only increased when the Trump administration announced plans to increase defense spending to $1.5 billion in 2027.

3 Companies That Benefit From a Bolstered Defense Budget

If the defense budget is going to increase to $1.5 trillion in 2027, much of that cash is going to go to large-cap companies in the aerospace and defense sector. Here are three you can expect to win substantial Pentagon contracts moving forward.

Lockheed Martin: A Capital Compounder Back in Action

Lockheed Martin Corp. NYSE: LMT has had a rough few years, but it remains the undisputed leader in U.S. defense contracting and has expanded its global footprint, becoming an indispensable partner to other NATO countries.

The company is responsible for the U.S.’s crucial F-35 fighter jet program and delivered a record 191 F-35 Lightning II aircraft in 2025. The Lightning II is one of the most advanced fighter jets ever developed, and fulfilling nearly 200 deliveries to a variety of global customers (including Denmark and Italy) shows that the company’s production line can handle increased capacity of more intricate designs.

Lockheed has also ramped up production of its PAC-3 MSE missile defense system, aiming to reach 2,000 units per year. Military hardware is typically a lower margin business than software like cybersecurity or AI, but a $1.5 trillion defense budget likely means expensive hardware like planes, ships, and missiles will be a priority. Lockheed already boasts a backlog of nearly $180 billion, and its valuation and dividend yield make it an attractive investment for both income and stock price appreciation. 

The company trades at 21x forward earnings, which is cheaper than many of its large-cap peers, such as L3 Harris Technologies Inc. NYSE: LHX and RTX Corp. NYSE: RTX. The dividend yields 2.37%, and Lockheed has raised payouts for 22 straight years, but the payout ratio of 77% is a bit higher than you’d like to see from a company with rising materials costs. 

LMT shares are off to a hot start in 2026, soaring more than 20% in less than three weeks. Technical traders likely noticed the breakout brewing in December, though. The price broke above the 50-day and 200-day simple moving averages (SMAs) at the same time the Moving Average Convergence Divergence (MACD) began to show bullish momentum. Lockheed reports Q4 2025 earnings on Jan. 29, and a report similar to Q3’s top- and bottom-line beat could propel shares even higher.

Boeing: Finally Pulling Its Weight Again in the Duopoly

For several years, Boeing Co. NYSE: BA was a stock investors would only watch with binoculars from a distance.

Not only did the company begin to lag its European competitor, Airbus SE OTCMKTS: EADSF, but a series of scandals and executive shuffling made Boeing uninvestable. But the company’s reforms appear to be progressing, and Boeing now expects to deliver 52 737 MAX aircraft per month by the end of 2026.

Expanding production is crucial to fulfilling the company’s backlog, which now exceeds $600 billion (including $76 billion in the defense segment). Boeing reported narrower-than-expected losses on a year-over-year (YOY) basis during its Q3 2025 earnings report, and it reports Q4 results next week on Jan. 27.

Boeing still has a suspended dividend and shaky cash flow situation, so any investment in BA shares will be partially speculative. However, the technical signals show that speculation is paying off as a Death Cross in December appears to be a false alarm. The MACD shows a bullish breakout as both lines cross above the histogram, and a Golden Cross is now imminent on the 50-day and 200-day SMAs.

Boeing hasn’t made a new all-time high since February 2019, and would need to gain more than 80% from current levels to reach that 2019 peak. However, the stock has sustained upward momentum for the first time in a few years, and an expanded defense budget should help it return to positive earnings.

Leidos Holdings: High Margin Products for a Modernized Pentagon

Leidos Holdings Inc. NYSE: LDOS is actually the value play of the three stocks on our list, despite being a relative newcomer following its spin-off from Science Applications International Corp. NYSE: SAIC in 2013.

A $25 billion market cap is large, but still pales in comparison to giants like Lockheed or Boeing. So why did Leidos make the cut? Because it sits at the forefront of modern defense technology, using AI to develop cybersecurity and cloud solutions for an increasingly digitized Pentagon.

The company inked a $455 million contract with the Air Force to provide cloud computing for the Cloud One program, and its cybersecurity and AI-enabled counterterrorism software aligns with many of the Pentagon’s high-profile initiatives.

Leidos trades at just 18x forward earnings and 1.49x sales, a moderate valuation despite selling some of the highest margin products to the Department of Defense. It also includes an interesting chart showing bullish signals despite volatility.

The stock is back above the 50-day SMA following a two-month bear trap and may be using this level as support once again. The Relative Strength Index (RSI) is also trending upward and has a long way to go before reaching overbought territory.