4 Defense Stocks to Buy Before the Money Arrives

This year, venture investors put a record $14.6 billion into defense tech, in only 5 months. The catch is that most of those companies are private. So we ran the public defense stocks through our quant system, and only a handful passed. Here are the 4 worth owning, including one most investors have never heard of, and why Palantir didn't make the cut.

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The Money Wave Hitting Defense Tech

Let's start with what just happened. Last week, Israel's Finance and Defense Ministries picked 2 venture funds, Adir Capital and Sling Capital, to back with state guarantees. Each fund gets about $33 million in guarantees from the government, and each has to raise at least $150 million on top of that. The focus is drones, autonomous systems, and electronic warfare.

That is a government putting its own credit behind startup money, on top of a wave that was already record-sized. Venture investors put $14.6 billion into defense tech in the first 5 months of 2026. All of 2025, itself a record, came in at $9.6 billion. More in 5 months than the previous 12, by a wide margin.

Here's the catch. A big chunk of that total is one company. Anduril raised $5 billion in a single round, and Anduril is private. You can't buy a share of it, and the same goes for most of the names catching this money.

So why should a public stock investor care? Because government-backed startup funding points to contract spending ahead. Every one of those drones and autonomous systems has to be integrated, tested, powered, and bolted onto platforms that already exist, and public companies own those platforms. The question is which ones.

Why Most Defense Stocks Don't Make the Cut

Our Zen Ratings quant model analyzes every stock across 115 different fundamental, technical, and AI factors. The results are boiled down to an intuitive letter grade of A through F. We also provide 7 unique Component Grades for every stock, Value, Growth, Momentum, and more, to point out each stock's unique strengths and weaknesses.

Here's why that matters today. The Defense industry as a whole grades a D in our system. So owning the theme is not enough. You have to pick carefully. Take Palantir (PLTR) as an example. It earns a C, a Hold recommendation, with a Value grade in the bottom 10% of the entire market. Great company. Wildly expensive stock. That is why it's not on this list.

Science Applications International (SAIC)

We will start with a value and safety play in Science Applications International (SAIC). SAIC is the company Washington calls when the military needs its software, networks and data systems modernized, the digital plumbing behind the U.S. military.

Why SAIC right now? Because new drones and autonomous systems are useless until they plug into military networks, and that integration work is exactly what SAIC sells.

There's a pattern of strong execution here. SAIC has beaten earnings estimates 5 straight quarters, most recently in late August. That is earnings momentum that often points to more beats ahead, and the next report lands in early December.

Here's the part to like most. Shares trade at a paltry forward PE of under 11. For a company sitting inside a $14.6 billion money wave, that's a bargain-bin valuation.

Now for the outlook from our Zen Ratings quant model. SAIC scores in the top 4% of all stocks, leading to an A, a Strong Buy recommendation. This greatly increases the odds of future share price outperformance. Inside the grades, Financial strength comes in at the top 19%. Our AI grade, which measures how likely shares are to outperform based on patterns in the data, not how much AI the company sells, lands at a stronger top 11%, well ahead of where it first looked. Safety, top 3%. And the standout is Value, based on 21 different value measures, top 2% of the entire market. Put it together and you get a safe, cheap stock in an industry about to get a lot of new spending.

One risk is that government contractors live and die by budget timing. A fight in Washington over next year's spending can push awards out a quarter or two.

But a top 2% Value grade, a top 3% Safety grade and 5 straight earnings beats, that is a great way to kick off this defense list. Next up, a company that builds the actual aircraft, and one NATO has been lining up to buy.

Embraer (EMBJ)

Let's keep the party moving with a Smart Money play in Embraer (EMBJ). Embraer is the Brazilian aircraft maker that sits right behind Boeing and Airbus in commercial jets. The reason it's on a defense list is the KC-390, a military transport plane that NATO countries have been ordering as they rebuild their air fleets.

Think about the timing. Europe is spending on defense like it hasn't in decades, and a transport aircraft is what every air force needs first. Meanwhile, the commercial jet business gives Embraer a second engine.

The latest quarter, reported in August, shows the machine working. Wall Street expected 62 cents per share. Embraer delivered $1.19, almost double the number.

Growth is nice. But growth plus value is much, much nicer. Embraer isn't dirt cheap, it's more of a GARP stock, Growth At A Reasonable Price, with a PEG ratio of 1.18 when the average company trades higher at 1.5.

Just 2 analysts cover shares, and both are onboard, 1 Strong Buy, 1 Buy, so a consensus Strong Buy recommendation. The more bullish price target implies an upside of more than 30% compared to current levels. When coverage is that thin, there's plenty of room for more analysts to show up, and more upgrades to follow.

Let's pop the hood on the Zen Ratings. Embraer scores in the top 4% of all stocks, earning the coveted A rating, a Strong Buy recommendation. The Component Grades highlight even more to like. Safety comes in at the top 19%. Growth, top 17%. And the standout is Sentiment, top 2% of the market. Sentiment tracks the Smart Money crowd, meaning estimate revisions, upgrades and institutional money flows. Grading this high, the big money is moving onboard.

One risk is the commercial aviation cycle. Airlines are fickle about deliveries, and when they push orders out, a manufacturer feels it fast. The defense side cushions that, but it doesn't erase it.

Even so, a growing NATO order book, a quarter that nearly doubled expectations and the Smart Money grade in the top 2%, Embraer deserves a spot on your watch list. Now for the biggest name on the list, and a chance to buy it on a dip.

Lockheed Martin (LMT)

Let's forge ahead with a Buy the Dip opportunity in Lockheed Martin (LMT). You know the name. F-35 fighter jets, missiles, missile defense, hypersonics, Lockheed is the biggest defense contractor on the planet, with one of the largest contract backlogs in the business. When venture money floods into drones and autonomous systems, those systems end up bolted to Lockheed platforms.

So why now? Because you get to buy the dip. Shares ran above $600 this summer, then slid, and today they sit roughly 25% below the 52-week high. For a business with this kind of backlog, that is the pullback long-term investors dream about.

And the business kept humming right through the slide. In July, Lockheed beat estimates, $7.94 per share against a $7.20 forecast, on revenue growing better than 10%.

Better still, they finished the quarter with a record backlog of more than $230 billion, and management raised its full-year outlook on the spot. So shares dropped 25% while the order book hit an all-time high. That is the disconnect worth buying.

Wall Street is warming up. 8 analysts cover Lockheed and land on a consensus Buy recommendation, 3 at Strong Buy and 5 at Hold. As of this writing, the average price target implies an upside of 25%. The most bullish analyst on the panel, from Susquehanna, who ranks in the top 3% on the Street for actual stock-picking performance, has a price target that implies an upside of about 35%.

Lockheed scores in the top 3% of all stocks, leading to an elite A rating, a Strong Buy recommendation. On to the component grades. The AI grade comes in at the top 11%, pointing to timely shares. Financial strength, top 8%, which is operational excellence that shows up in future earnings reports. Value, top 7%. And the standout is Safety, top 7% of the entire market, essentially tied with Value at the top of the profile. The pattern tells you this is a durable, low-drama compounder that just went on sale.

The greatest risk here is program charges. Big contractors sign fixed-price deals, and when a program runs over, the company eats the difference. Lockheed has taken multi-billion-dollar charges twice in the past 2 years, and it could happen again.

Still, a 25% dip, a record backlog and the grades that matter most for a long-term holding all in the top 8%, Lockheed is the anchor of this defense list, and one to anchor a portfolio with.

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Astronics (ATRO)

This is the highest-rated defense stock in our entire system, and almost nobody on Wall Street bothers to cover it.

Drumroll please, it's Astronics (ATRO). Astronics makes the electronics inside aircraft, power systems, connectivity, and the test equipment militaries use to make sure it all works. Military aircraft need power, and they need testing, and Astronics sells both. Our model ranks it #1 of all 85 Defense stocks, ahead of Lockheed, ahead of everyone else.

And just like with Lockheed, this final pick is also on sale. Astronics spiked above $90 in July and has since pulled back about 30% from the 52-week high. And what happened next is why it's worth liking.

Defense spending is way up and shows no signs of slowing. Over the past 2 years, Astronics went from losing money to beating earnings estimates for 4 consecutive quarters. The latest, in August, came in at 70 cents against a 59-cent forecast, on a quarter that earned just 3 cents a year earlier.

That turnaround is the mechanism, and it explains why Wall Street forecasts revenue growing under 12% a year, and that translates into earnings growing nearly 41% in the year ahead, more than 2 and a half times the aerospace and defense industry average.

And with a PEG right around 1, you're paying about two-thirds of the market average for that growth.

As you would expect for a stock nobody's heard of, Wall Street is kind of asleep at the wheel with only 1 covering analyst, from TD Cowen. He ranks in the top 12% of all analysts for stock-picking performance, has a Strong Buy recommendation on shares, and as of this writing, his price target sits more than 40% above current levels.

Astronics earns an A, a Strong Buy recommendation. But this one lands in the top 1% of all stocks. Beating out 99% of all other stocks, it may be more fair to call it an A+. Safety comes in at the top 19%. Sentiment, top 19%, so the Smart Money crowd is moving in. Financial strength, top 6%. And the standout is Growth, top 1% of the entire market, which foreshadows more earnings beats ahead. Growth and Financial strength are the 2 most vital grades pointing to future outperformance, and Astronics has both.

The 1 weak spot comes with the territory. This is a $3 billion company, and small caps swing. July proved it, and it cuts both ways.

All in all, look at what you're getting. Top 1% Growth, top 6% Financial strength, a turnaround 4 quarters deep, a top-tier analyst calling for 40% upside and the #1 rank in the whole Defense industry, all after a 30% pullback. Astronics is the perfect pick to close this list, and one to seriously consider for your portfolio.

That’s About It For Now…

So there you have it. $14.6 billion is flooding into defense tech, and while most of it chases private companies, the public market has its own winners. SAIC for the Pentagon's software, Embraer for the aircraft, Lockheed Martin as the anchor on a dip, and Astronics as the #1 rated defense stock most investors have never heard of. And pullbacks like the ones in Lockheed and Astronics don't stick around forever.

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