This article looks at the 5 Best Defense Stocks to Buy According to Hedge Funds. You can see the expanded list of 9 Best Defense Stocks to Buy According to Hedge Funds here.
Despite ongoing geopolitical conflicts and rising military expenditure across the world, U.S. defense stocks have largely struggled in 2026. The NYSE Arca Defense Index is up just 2.76% year-to-date, as of October 29, and is trailing the S&P 500 which has gained 12.57% during the period.
Check out our list of the 10 Best Aerospace Dividend Stocks to Buy.
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Experts attribute much of the stagnant run to budget uncertainty, which has weighed in on investor sentiment. Other factors include shifting warfare technologies, and concerns regarding overstretched valuations of companies in the sector after years of conflict.
On September 23, Bernstein analyst Douglas Harned said that investors should hold off on buying the selloff until the November 3 midterm elections are over. The firm views the elections as a potential clearing event that will bring more clarity about the budgets.
Harned dismissed concerns about a Democratic victory adversely impacting defense spending. The analyst said that historical trends did not support the fears and that he anticipates the 2027 investment budget to rise more than 10%.
While talking to Schwab Network last month, Brand Clark, the Director of Financial Planning at The Clark Group Asset Management, said that they view defense as more than a short-term trade. The sector remains a strategic part of their portfolio.
Clark said that even if the Iran war ends, defense spending will not simmer down. Money will continue to go into restoring inventories and building deeper stockpiles, especially given the long-term threats from countries like China and North Korea.
With that said, let’s head over to the list of the best defense stocks to buy according to hedge funds.
Methodology
We used screeners to identify defense stocks that trade on American exchanges. From there, we selected the top 5 companies that had the highest number of hedge fund investors having a stake in them, based on Insider Monkey’s database of prominent hedge funds as of Q2 2026. Finally, we ranked them in ascending order based on the number of hedge funds holding positions. Where two or more stocks were tied on hedge fund sentiment, we used market cap as a tiebreaker between them. All figures are as of the close on October 29.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Insider Monkey’s quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 599.2% since May 2014, beating its benchmark by 372 percentage points (see more details here).
