At dinner parties, no one discusses a certain type of stock. There isn’t a charismatic founder wearing a black T-shirt. Nothing is promised to be disrupted by it. The U.S. government is nearly always the client, the factories are noisy, and the products are deadly. Nevertheless, you’ll notice something if you stroll around the floors of any large brokerage in 2026. Analysts keep returning to the defense.
The headlines might be the cause. The National Defense Authorization Act for the fiscal year 2026 came in at $900.6 billion, a sum so enormous that it almost seems meaningless until you consider that the conflict in Ukraine is dragging on for another year, the Middle East is still unresolved, and the rivalry between Beijing and Washington has ceased to be subtle. Spending doesn’t appear to be slowing down, according to investors. It’s difficult to disagree with them.
Based on Morgan Stanley’s research, U.S. News recently listed seven names that are worth keeping an eye on. The list resembles a who’s who of American industrial power. Near the top, GE Aerospace provides engines for about 50,000 commercial and 30,000 military aircraft worldwide. The stock’s 2026 decline, according to analyst Kristine Liwag, is an opening rather than a warning, particularly if tensions with Iran ease and oil prices rise. With a recent close of about $297, Morgan Stanley is aiming for $400. That’s a big, self-assured gap.
Then there is RTX Corp., the behemoth created by the union of Raytheon and United Technologies in 2020. Raytheon handles missiles and the more complicated business of cybersecurity and intelligence work, while Pratt & Whitney handles engines. Strong words in a crowded field: Liwag refers to it as her top aerospace choice. Someone needs to replenish the Pentagon’s weapons stockpile since it has been declining for years. RTX is positioned.
The quieter name on the list is Howmet Aerospace, but that doesn’t mean it’s smaller. The company produces titanium structural elements, engine components, and lightweight metal parts—the kind of unglamorous parts that keep contemporary aircraft together. Pricing power, astute acquisitions, growing margins—the case is nearly dull in its expertise. In contrast to a recent $269, Morgan Stanley sees $315.
General Dynamics manufactures Gulfstream aircraft, nuclear submarines, and Abrams tanks—a peculiar and peculiarly American combination. As this develops, it appears that the company has quietly outperformed its competitors in 2026, and the aerospace segment’s book-to-bill ratio of about 1.2 has allayed concerns about Middle Eastern clients reducing their Gulfstream orders. Northrop Grumman, on the other hand, is at the heart of America’s nuclear triad, which consists of missiles, bombers, and submarines that can retaliate in the worst-case scenario. Liwag contends that the missile and missile defense industries justify the higher capital expenditures required by its B-21 Raider program this year. The $745 target set by Morgan Stanley suggests significant gains from the $558 close.
The dark horse is TransDigm Group. The business creates both original and aftermarket aircraft parts, and in recent years it has been consuming rivals like Raptor Scientific, the components division of Communications & Power Industries, and SEI Industries. Liwag believes that the stock appears to be the most attractively valued in its peer group and that investors have been overly pessimistic about commercial aftermarket softness. $1,680 is the target price. $1,191 was the most recent close. That’s a big difference.
L3Harris Technologies completed the list with a first-quarter book-to-bill ratio of 1.4x, which is the kind of figure that quickly calms doubters. The most notable was the Space & Missions Systems division, and Liwag believes that the guidance appears purposefully conservative. Upward surprises are possible.
It’s difficult to ignore the timing. Excitement doesn’t drive these businesses. Contracts, backlogs, and the tedious process of congressional budgets are all things they deal with. But now that the world is as it is, that grind seems less like a constraint and more like the whole purpose.
