Current Military Industry Concept Stock Investment Guide: Exploring Defense Industry Opportunities Amid Global Conflicts

Regional conflicts are frequent, driving defense spending to rise, and military concept stocks are becoming the market focus. Under the catalysis of the Ukraine-Russia war and the Israel-Palestine conflict, countries’ military budgets are continuously reaching new heights, and the rise of technological warfare has led to a surge in demand for cutting-edge weapons such as drones and precision missiles. This not only attracts investors’ attention but also brings unprecedented growth opportunities to the military industry.

Why should you pay attention to military concept stocks now?

The nature of modern warfare has changed. The battlefield relying on manpower is gradually being replaced by an era dominated by technological victory. Information warfare, public opinion warfare, drone operations—these new forms of combat have generated enormous demand for advanced defense technology.

Countries worldwide face the same dilemma: in an aging population and declining birthrate era, traditional troop numbers are hard to sustain. How to achieve the same national defense goals with fewer personnel? The answer is technology and automated weapons. This drives military and political decision-makers to continuously increase defense budgets, seeking military solutions that achieve “minimal casualties, maximum effectiveness.”

Major economies such as China, Taiwan, and the United States have significantly increased their defense budgets in recent years, and this trend is unlikely to reverse in the short term. Therefore, the demand foundation for military concept stocks remains relatively solid.

How to identify worthwhile military concept stocks for investment?

Not all companies claiming to be “military industry” are worth attention. Before investing, you must ask yourself three key questions:

First, what is the proportion of military business? Some companies may have less than 30% of revenue from military sectors, with most income still relying on civilian markets. Companies like Raytheon and Boeing, which have both military and civilian operations, are typical examples. When military orders increase but the civilian market remains weak, the overall stock price may still decline.

Second, does the company’s technological direction meet future demands? Future military sizes may no longer expand but focus on upgrading equipment. Army-related orders may stagnate, while the demand in the Air Force, Navy, and information warfare sectors will continue to grow. When choosing companies, pay attention to their R&D directions.

Third, does the company have an insurmountable moat? The entry barriers in the defense industry are extremely high, involving national security. Trust takes decades to build, and many technologies and patents are under exclusive supply. Leading companies are relatively difficult to be overtaken, making them more valuable for long-term investment.

Overview of US defense industry leaders

Lockheed Martin ( LMT ): A steadily growing defense giant

Lockheed Martin is the world’s largest defense contractor, involved in missile systems, fighter jets, space defense, and other high-end fields. Since going public, the company’s stock price has shown a clear long-term upward trend, with corrections mainly due to broader market adjustments. From a long-term perspective, this is a classic choice among military concept stocks.

Northrop Grumman ( NOC ): Leader in radar and defense technology

Northrop is the fourth-largest defense manufacturer globally and the world’s largest radar producer, a pure military industry company. The company has steady profits, a long-term upward stock trend, and has increased dividends for 18 consecutive years. This year, it accelerated a $500 million share buyback plan to further protect shareholder interests.

Northrop focuses on “strategic deterrence,” involving frontier defense areas such as space, missiles, and communications technology. This means that as long as geopolitical tensions persist globally, even without actual warfare, countries’ fears will drive increased defense spending. Northrop’s deep moat and leading technological position make it an excellent long-term investment choice.

General Dynamics ( GD ): Stable income military stock

General Dynamics is one of the top five defense suppliers in the US, involved in land, sea, and air forces. Its civilian division manufactures Gulfstream jets, while its military business covers aircraft and weapons systems.

The company’s unique advantage is that its civilian division is less affected by economic cycles, making its overall revenue relatively stable. Even during the 2008 financial crisis and the 2020 pandemic, profits showed no significant fluctuations. This stable performance has enabled General Dynamics to achieve 32 consecutive years of dividend increases—an honor held by only 30 US companies.

Although revenue growth is not particularly rapid, the company improves profits through cost control and continues to buy back shares to benefit shareholders. While growth potential is limited, its deep moat makes it suitable for investors seeking stable returns.

Raytheon ( RTX ): Companies worth watching with challenges

Raytheon is a major global defense company with a stable base of military orders. However, its stock performance has been weak this year, even declining during the global rebound in 2023. The main reason is serious issues in its civilian sector.

Raytheon supplies parts for Airbus A320neo aircraft, which have quality defects—certain rare powder metals may cause engine parts to fracture under high pressure. As airlines ramp up new aircraft purchases, Raytheon faces huge maintenance costs: it is estimated that over the next 3-4 years, about 350 A320neos will need re-inspection annually, with each repair taking up to 300 days. This not only impacts revenue but also raises risks of lawsuits and customer loss.

Investing in Raytheon requires caution. Although military business is growing steadily, the crisis in its civilian operations could offset all advantages. Until these issues are resolved, profitability remains unpredictable.

Boeing ( BA ): Clouded outlook in the civilian market

Boeing is one of the two giants in the global aviation industry, with military products including B52 bombers, Apache helicopters, and others. It is also one of the US’s top five defense suppliers. However, like Raytheon, Boeing’s difficulties stem from its civilian business.

The 737 MAX aircraft experienced major accidents in 2018-2019, leading to worldwide grounding, and the COVID-19 pandemic further impacted profits. A bigger threat is the changing market landscape: traditionally, Boeing could monopolize the global market for decades, mainly relying on subsidies from Western governments. But with rising US-China trade tensions, Chinese airlines are supporting domestic manufacturers, and “COMAC” (Commercial Aircraft Corporation of China) is expected to gain a foothold in the global market, nibbling away at Boeing’s traditional market share.

From an investment perspective, Boeing’s military business should grow steadily, but its civilian prospects are bleak. This stock is suitable for buying on dips rather than chasing rallies.

Caterpillar ( CAT ): Blurred boundary military concept stocks

Caterpillar is classified as a military concept stock, but in reality, military revenue accounts for less than 30%, with main business in construction machinery. The company’s revenue mainly depends on global infrastructure spending and raw material demand.

Such companies may see demand peaks during post-war reconstruction, but fundamentally they still belong to civilian industry. If focusing on military opportunities, Caterpillar is not the first choice.

Taiwan military concept stock layout

The escalation of cross-strait tensions has become a focal point of global geopolitics. Both Taiwan and China have significantly increased their defense budgets in recent years, creating historic opportunities for local Taiwanese military companies.

Thunder Tiger Technology ( 8033.TW ): From toys to drones

Thunder Tiger Technology was once a major remote-controlled model toy manufacturer. Recently, it successfully transformed into a military industry company due to the explosive growth of the drone market. The sharp rise in stock price in 2022 has fully reflected market optimism about its prospects. As military procurement demand continues to heat up, this company warrants ongoing attention.

Hanxiang ( 2634.TW ): Diversified defense and civilian platforms

Hanxiang operates in both defense and civilian sectors, but compared to Boeing and Raytheon, its business structure is more stable. Its civilian division focuses on aircraft maintenance and parts sales, while its military division mainly produces trainer aircraft.

Its key advantage is that its maintenance and repair business is relatively counter-cyclical; as long as the aviation industry operates, it can generate continuous income. Whether military demand increases or the civilian market prospers, Hanxiang can benefit. Coupled with growth in the drone market and new orders driven by reopening, Hanxiang’s stock performance is relatively stable and worth期待。

Why are military concept stocks worth holding long-term?

Applying Buffett’s classic investment framework, military concept stocks meet the three conditions of “enough wet snow, enough long runway, and a deep moat.”

Super long-term industry runway: War and conflict have never ceased throughout human history, and the demand for defense is destined to be endless. This means the military industry has unparalleled long-term demand stability.

Deep competitive moat: Military technology often represents the cutting edge of human R&D, usually first applied in military service for years before gradually entering civilian use. High entry barriers, national security sensitivities, trust built over decades, and patents with exclusive supply make it nearly impossible for established leaders to be overtaken.

Growth driven by geopolitical dividends: The global political landscape is shifting from economic integration to regionalization. Since Trump’s “manufacturing return” policy, the concept of a global village has waned, and countries are turning toward regional politics and military defense. This trend drives continuous increases in defense budgets, expected to become the norm in the future. The main reason for the sharp decline in defense stocks was “arms reduction,” but in the current geopolitical environment, such a possibility is very low.

Core tips for investing in military concept stocks

While the market demand foundation for military concept stocks is solid, investors must conduct thorough due diligence before choosing specific targets:

First, confirm the proportion of military revenue. Don’t be fooled by the label “military stock”; some companies may only have marginal military business. Lessons from Raytheon and Boeing show that even with strong military demand, a decline in civilian business can drag down overall performance.

Second, pay attention to changes in the civilian market. For dual-business companies, it’s essential to track the economic indicators of both sectors.

Third, evaluate the company’s moat. Prioritize companies with technological leadership, a solid trust foundation, and difficulty being replaced.

Compared to other sectors, military stocks are less likely to face corporate bankruptcy risks. Governments are major clients, maintaining close and stable relationships with defense companies, making it unlikely for companies to fall into difficulties. This gives military concept stocks a generally solid long-term investment foundation.

Summary

The market demand foundation for military concept stocks is stable, and geopolitical environments continue to provide growth momentum. However, not all companies labeled as “military industry” are suitable for investment. Investors should comprehensively consider military business proportion, civilian market trends, technological moat, and global geopolitical changes to make rational investment decisions. Choosing the right targets, military concept stocks can become a stable option in long-term asset allocation.