Three Defense Stocks to Buy Amid Plan for a Nuclear Shield

05/20/2025

The three defense stocks to buy would potentially capitalize on the so-called “golden dome” that President Trump discussed during his State of the Union address and again in further detail in his May 20 press briefing.

Critics say the cost of the proposed nuclear shield would be astronomical and it is unlikely to be able to protect the entire United States. Proponents like President Trump envision a system similar to the “Iron Dome” used by Israel to shoot down incoming missile from its various foes.

Three Defense Stocks to Buy Amid Plan for a Nuclear Shield: Trump’s Dream

The middle-ground view is that the “golden dome” would be desirable but possibly not practical due to its high projected cost and potential not to meet expectations. The program also would need to be funded for many years and require the expenditures to do so that will be difficult to find with the federal government running a huge deficit and adding to it every year.

President Trump said that he hoped the golden dome would be ready by the time his term as president ends. The nuclear shield would be intended to stop any missile, whether fired from land, sea or space, he added.

In addition, Canada would be allowed to join the effort to ensure the shield protects its country, too, President Trump said.  America is going to protect its citizen “like never before,” President Trump said.

“Everything is going to be made in the U.S.A.,” President Trump said.

Three Defense Stocks to Buy Amid Plan for a Nuclear Shield: PLTR

Denver-based Palantir Technologies (NASDAQ: PLTR), recommended in TNT Trader on April 8, has jumped more than 56% since then. Palantir is a software company that operates largely outside of the tariff fallout, and it recently announced a deal with NATO to supply it with the company’s Maven AI software.

The stock also is a recommendation of the Investing Edge newsletter led by Jim Woods, a former Army officer. The stock is up 67.04% since Jan. 1. Woods recommended the position in January in his Investing Edge publication, allowing his subscribers to be up substantially in the position even when the market was pulling back.

Jim Woods heads the Investing Edge newsletter and Bullseye Stock Trader.

Palantir’s partnership with the U.S. Army began in 2008 to design and deploy modern mission software with improved capabilities. The company’s solutions are used in nearly every Army mission, ensuring data is accessible for fast decision-making that allows the warfighter to out-think and out-pace the adversary, Palantir officials said.

Palantir seeks to operate as the “connective tissue” between Army personnel, data and resources by delivering critical information to the key decision-makers when needed, company officials stated. Its technology enhances the preparedness of soldiers who use wearable sensor and mobile technologies in the battlefield.

However, the huge amount of data produced risks overwhelming both the individual soldiers and the battlefield decision-makers who lead them. Palantir tries to harness hardware solutions, reduce system complexity and provide improved human-machine interfaces to aid soldiers in the field and commanders at a forward-operating base (FOB). Situational awareness powered by visual augmentation, sensor optimization and secure capabilities helps to reduce cognitive challenges, as well as to protect and to connect warfighters.

Those who remember the U.S. special forces locating al-Qaeda founder Osama bin Laden‘s compound in Abbottabad, Pakistan, where he was killed on May 2, 2011, may be interested to know that a Palantir software product called “Gotham” was rumored to have been used by counterterrorism analysts at U.S. government agencies to integrate and analyze data. The information could have included intelligence reports, surveillance and reconnaissance.

Before Woods launched the Investing Edge newsletter early in 2025, he served as a former Army officer and combat veteran who tracks the defense industry closely. When it comes to military operations, aggression, manpower and firepower still require the right intelligence to win battles, Woods said. Palantir is a star performer in the Top 10 Growth Accelerators portfolio of Investing Edge.

“What Palantir does so well is provide the right intel,” Woods continued.

Intelligent ground systems are at the heart of the Army’s realization of a multi-domain operations concept, according to Palantir. The company’s goal is to empower commanders to make sense of a complex battlefield, requiring ground systems to aid understanding.

Chart courtesy of www.stockcharts.com

Lockheed Martin (NYSE: LMT), of Bethesda, Maryland, is a defense and aerospace company that resulted from a 1995 combination between Lockheed Corporation and Martin Marietta Materials, Inc. In its current form, Lockheed Martin focuses on defense, space, intelligence, homeland security and information technology. LMT is another Citi Research buy.

The company’s key business segments are Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. Lockheed Martin’s management recently laid out the case that margins are likely to trough in 2024 and drift toward 11%-plus over time, driven largely by product mix.

The loss-making classified contract at Lockheed Martin’s MFC business will be a tailwind in 2025, i.e., lower forward loss charges, while the rest of the margin accretive MFC portfolio is likely to grow faster than the remainder of the company. Further, new awards across the company better reflect the current cost environment and should produce margins higher than pre-pandemic backlog, according to a Citi Research note.

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“Defense will continue to be a big business,” said Michelle Connell, who heads Portia Capital Managment in Dallas. Connell is recommending Lockheed as a buy and the President’s May 20 announcement about the golden dome is one of her reasons.

According to the Stockholm International Peace Research Institute, (SIPRI),  2024 world military expenditures reached $2718 billion. That’s an increase of 9.4% from 2023 and the largest year over year increase since the end of the Cold War. Military spending is increasing globally, but most especially in Europe and the Middle East.

For context, for the current year, the United States has budgeted $895 billion. Second runner-up is China with $267 billion. 3rd runner-up is Russia with $126 billion.

Given the above backdrop, investing in the defense sector has a high probability that it will continue to be profitable, Connell said. This year, LMT made it clear that they are going to target increasing their growth in Europe, he added.

“The company is well known for its F-35 aircraft and LMT’s management is confident that they will be able to deliver its 2025 goals for this product line,” Connell told me. “When Trump signed his recent $142 billion deal with Saudi Arabia, F-35s were not mentioned. It will be interesting to see how this develops.”

While LMT recently lost its F47 contract to Boeing, management has stated that they believe that this revenue will be made up elsewhere, Connell said.

Michelle Connell heads Portia Capital Managment

Huntington Beach, California-based Karman (NYSE: KRMN) reported strong first quarter results, coupled with impressive revenue visibility (95% of 2025 guided-revenue covered), as well as a strong book-to-bill (>1.5x) to provide reassurance that supports the company’s long-term fundamental story, wrote Timothy Horan, an equity research analyst with Oppenheimer. The company is positioned in three of the fastest growing end markets in defense (strategic missiles/nuclear deterrence, tactical missiles, and space), aligning with key priorities of the Pentagon.

“Furthermore, the company is poised to be a contributor with its unique IP in incremental defense initiatives, e.g. the golden dome, supporting its defense prime customers. He recently raised his target price on Karman to $46.50 and maintains a Buy rating. He added:

Key Takeaways from the Quarter — Karman reported a strong first quarter with revenues, adj. EBITDA, and adjusgted EPS outpacing consensus estimates. On a GAAP-basis, the company reported a net loss due to one-time expenses that arose during the IPO transaction process. The company re-affirmed its full-year guide and noted it has backlog visibility to 95% of its 2025-guided revenues as of the end of April and expects full-year coverage to be achieved sometime in the second quarter.

Key Debates — 1) The outlook for defense spending given apparent efforts in the United States to re-shape the geopolitical environment and the broader U.S. government. In our view, nuclear deterrence, tactical missiles and space are likely protected areas of the budget, which fall in-line with 17 priorities from the Pentagon. 2) The resilience of KRMN’s EBITDA margins in a “DOGE world” that is focused on costs and efficiency. In our view, margins levels are defendable to the extent the company’s solutions drive down costs for customers, and by extension the government.

Potential Catalysts — 1) Award activity on new platforms and the expansion of content on existing ones; 2) M&A activity that adds capability sets that could drive new awards and/or shipset content growth; and 3) more details on the U.S. missile defense dome proposed by the President, which could lead to more work for the company over time given its positioning across missiles and space.

Model and Price Target Changes — Given the company’s strong demand visibility in conjunction with its positioning in three of the fastest growing end markets, we raise our revenue outlook for 2025-27, which flow through to our adj. EBITDA and adj. EPS estimates. As a result, we raise our target price to $46.50 from $42, which is derived at 29x our 2027E adj. EBITDA numbers. Maintain Buy.

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Geopolitical Risk

Gold prices fell on Tuesday, pressured by growing optimism surrounding a potential ceasefire between Russia and Ukraine. President Trump announced that both countries had agreed to begin negotiations “immediately,” which lifted sentiment and reduced demand for safe-haven assets such as gold.

In addition, a May 14 White House news release announced the United States and China committed to take the following actions by May 14, 2025:

The United States will (i) modify the application of the additional ad valorem rate of duty on articles of China (including articles of the Hong Kong Special Administrative Region and the Macau Special Administrative Region) set forth in Executive Order 14257 of April 2, 2025, by suspending 24 percentage points of that rate for an initial period of 90 days, while retaining the  remaining ad valorem rate of 10 percent on those articles pursuant to the terms of said Order; and (ii) removing the modified additional ad valorem rates of duty on those articles imposed by Executive Order 14259 of April 8, 2025 and Executive Order 14266 of April 9, 2025.

The three defense stocks to buy amid a plan for a golden dome to protect the United States and possibly Canada from missile could pay off for investors despite the uncertainty of whether the plan will succeed with causing a fiscal threat.

Paul Dykewicz is the editor of StockInvestor.com and the editorial director of Eagle Financial Publications in Washington, D.C. He writes and edits for the website, as well as edits investment newsletters, time-sensitive trading alerts and other reports published by Eagle. He also is an accomplished, award-winning journalist who has written for Dow Jones, USA Today and other publications, as well as served as business editor of a daily newspaper in Baltimore. In addition, Paul is the author of the inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain.” He received his MBA in finance from Johns Hopkins University, where he was a two-time president of the school’s Finance Club. In addition, Paul has a bachelor’s degree from the University of Michigan and a master’s degree in journalism from Michigan State University. Outside of work, Paul volunteers with a faith-based organization to assist the poor in Southeast Washington, D.C., to learn personal finance skills to lift themselves out of debt.