Top 16 Defense Investments 2025
416: The Lord of War Guide: 2025
Morning gents and gals.
On the heels of yesterday’s spicy post on the Ukraine Russia War and the lunacy that the normie masses are supporting, I figured now is as good a time as ever to drop a guide to defense stocks and the sector in general.
Global tensions are at levels we haven’t seen since the Cold War’s dying days. Russia’s bombers are getting clipped in drone strikes, Europe’s rearming like it’s 1939, and China’s building a navy bigger than the British Empire’s at its height.
This is the real driver of defense investing: not just contracts and R&D, but an entire world order that’s breaking down and rebuilding on the back of steel, drones, precious metals, and semiconductors.
Of note this week in the defense world:
Ukraine's "Spiderweb" Drone Offensive: Over the weekend, Ukraine carried out a large-scale drone attack with the code name "Spiderweb," targeting Russian nuclear bombers and key infrastructure. The operation involved 117 drones and caused an estimated $7 billion in damages. Interestingly, despite the operation's size, major U.S. defense stocks like Lockheed Martin, Northrop Grumman, and General Dynamics barely moved, while drone-focused players such as Kratos and AeroVironment saw some modest gains.
Trade Tensions Impacting Defense Manufacturing: In May, U.S. manufacturing contracted for the third straight month, driven by renewed trade tensions globally. President Trump's decision to hike steel tariffs to 50% has rattled supply chains, driven up costs, and squeezed margins for many manufacturers. In response, urgent EU-U.S. negotiations are underway to hopefully ease these escalating trade disputes.
UK Defense Sector Boost: In the UK, defense players like Babcock and BAE Systems enjoyed recent stock rallies after the government committed to fresh defense investments and Kier Starmer said the military is preparing for a war time focus and that the UK is facing its biggest threat since the Cold War. The UK's latest strategic defense review spotlighted priorities like submarines, munitions, cyber capabilities, and long-range weapons, bolstering demand for firms with exposure to these areas domestically and abroad.
The defense market is expected to grow from $491.06 billion in 2024 to $527.06 billion in 2025, with a compound annual growth rate (CAGR) of 7.3% (Businessresearchcompany).
The environment we find ourselves in at present is extremely unpredictable.
The global security environment is more volatile than it has been in years on the heels of the Global War on Terror, with conflicts flaring up across Africa, the Middle East, Europe, and the Asia-Pacific. In Africa, insurgencies in the Sahel, fresh clashes in the Congo, and Sudan’s ongoing civil war have caused widespread instability and humanitarian crises.
In the Middle East, Israel’s military operations in Gaza, tensions with Hezbollah, Iran’s nuclear ambitions, and renewed violence in Syria and Yemen have all kept the region on edge.
Meanwhile, Europe remains gripped by the ongoing Ukraine conflict, forcing countries to rethink their defense posture and ramp up military spending.
In the Asia-Pacific, you have tensions between China and Taiwan at a boiling point, with China flexing its muscles in the South China Sea and broader Indo-Pacific region. Against this backdrop of rising conflict and uncertainty, the defense sector is more relevant than ever, with governments pouring resources into bolstering security and modernizing their military capabilities. The bearish scenario for defense really doesn’t exist in the current landscape of foreign affairs.
Defense returns can be modest compared to some tech or high growth stocks, but they reflect the sector's stability and resilience, especially during periods of market volatility.
Moving forward we now have the added variable of AI, drones, and sophisticated cyber attacks added to the threat matrix many of these companies are going to have to grapple with and government’s will pay handsomely to do so. PLTR 0.00%↑ is a great potential example (that many of our paid subs absolutely printed on) of this as are several smaller companies gaining momentum quickly.
Today we’re going to cover:
16+ top market picks in the global defense industry
How you can get exposure to them (direct or through ETFs)
A range of smaller companies on the rise to keep an eye on in the future
We’re going to cover some household names but also some lesser known defense companies today and a host of smaller companies that have some serious momentum.
Defense — on top of things like tech, AI, and crypto, are likely some of the safest bets for investors or traders who want to make sure they have a substantial piece of upside into the next 10 years that will grow even if the global landscape continues to deteriorate.
We all can’t become a shady arms dealer who wears linen jackets, smoke Cubans, and sells AK-47s to rebels in Zaire or Yemen for blood diamonds, but the next best thing is owning a piece of the behemoths and underdog companies set to print in the coming years.
Let’s get into it.
War, war never changes.
— Ron Pearlman