A new golden age coming for U.S. aerospace and defense?

The global aerospace and defense sector has entered what many investors increasingly view as a structurally supportive phase. Unlike past cycles driven purely by geopolitics or commercial aviation booms, today’s environment combines multiple long-duration forces: rising defense budgets, sustained geopolitical tension, the normalization of higher interest rates, and a multi-year recovery in commercial aerospace. Against this backdrop, U.S.-listed aerospace and defense equities have attracted renewed attention, both through direct stock selection and via sector-focused ETFs.

This article examines the most widely held U.S. aerospace and defense names—represented by a stock universe that broadly mirrors the core holdings of major defense and aerospace ETFs—and explores why certain companies are consistently favored by investors over others. Rather than focusing on short-term performance, the emphasis is on business models, structural advantages, and where long-term capital tends to gravitate.

The ETF space

Most investors gain exposure to aerospace and defense through ETFs such as the iShares U.S. Aerospace & Defense ETF (ITA), the SPDR S&P Aerospace & Defense ETF (XAR), or the Invesco Aerospace & Defense ETF (PPA). While construction methodologies differ—ITA is more market-cap weighted, XAR more equal-weighted—the underlying universe overlaps significantly. Names such as Lockheed Martin, RTX, Northrop Grumman, Boeing, and General Dynamics form the backbone, complemented by a layer of high-quality suppliers and niche technology firms.

The importance of this ETF lens is not trivial. Companies that consistently command higher weights in these vehicles benefit from structural demand for their shares, while those that outperform operationally often end up pulling ETF returns higher over time. Understanding which firms are merely “present” in ETFs and which ones actually drive performance is therefore critical.

Defense primes: scale, backlog, and predictability

At the top of the hierarchy sit the defense primes: Lockheed Martin (LMT), RTX Corporation (RTX), Northrop Grumman (NOC), and General Dynamics (GD). These companies are defined by scale, deep relationships with the U.S. Department of Defense, and multi-decade program visibility.

Lockheed Martin remains the archetypal defense contractor. Its dominance in fifth-generation fighter aircraft through the F-35 program, combined with missile systems, space assets, and classified programs, gives it unparalleled revenue visibility. Investors are drawn less to rapid growth than to predictability: long-dated contracts, resilient cash flows, and strong shareholder returns through dividends and buybacks.

RTX occupies a unique position by straddling both defense and commercial aerospace. Through Raytheon, it is a major missile and air defense supplier; through Pratt & Whitney and Collins Aerospace, it is deeply embedded in the global aviation ecosystem. While engine issues have weighed on sentiment in recent years, many investors continue to view RTX as a core holding due to its diversified exposure and unmatched scale.

Northrop Grumman is often perceived as quieter but no less strategic. Its strength lies in advanced systems, including bombers, space systems, and missile defense. Classified programs and high barriers to entry make Northrop particularly attractive in an environment where technological sophistication increasingly matters as much as sheer production volume.

General Dynamics, with its mix of defense platforms and Gulfstream business jets, adds a slightly different flavor. The company benefits from naval programs, land systems, and a profitable aerospace segment tied to business aviation, offering a degree of diversification within a defense-heavy portfolio.

Boeing: a special case

No discussion of aerospace can avoid Boeing (BA), though it occupies a category of its own. As one half of the global commercial aircraft duopoly, Boeing has enormous strategic importance, yet its investment case remains contentious. Execution issues, regulatory scrutiny, and balance sheet concerns have made it a less favored single-stock pick, even as it remains a major ETF constituent by necessity.

For many investors, Boeing represents optionality rather than conviction: a stock held because of its systemic importance, not because it offers the cleanest risk-adjusted return. In contrast, capital often flows more enthusiastically toward suppliers that benefit from aircraft utilization regardless of which manufacturer dominates new deliveries.

The quiet winners: aerospace suppliers and compounders

It is among suppliers that some of the most compelling long-term investment stories emerge. Companies such as TransDigm Group (TDG), Howmet Aerospace (HWM), HEICO (HEIA), Curtiss-Wright (CW), and Woodward (WWD) are frequently cited as favorites by professional investors.

TransDigm is widely regarded as best-in-class. Its business model is built around proprietary aircraft components with limited competition, allowing for exceptional pricing power. Crucially, a large portion of its revenue comes from the aftermarket, meaning it benefits not just from new aircraft production but from the entire installed base over decades. This recurring, high-margin profile has made TransDigm one of the most successful compounders in the sector.

Howmet Aerospace offers leverage to the heart of modern aviation: engines and structural components. As aircraft engines become more complex and materials more specialized, Howmet’s advanced manufacturing capabilities position it favorably. Investors appreciate its exposure to next-generation platforms and its improving margin profile as commercial aerospace recovers.

HEICO occupies a niche that is less glamorous but highly profitable. By producing FAA-approved replacement parts and avionics, HEICO enables airlines to reduce maintenance costs without compromising safety. Its disciplined acquisition strategy and steady organic growth have made it a long-term favorite for investors seeking compounding rather than cyclical swings.

Curtiss-Wright and Woodward, while lower-profile, are similarly respected for consistency. Curtiss-Wright’s exposure to defense electronics, naval systems, and nuclear applications provides stability, while Woodward’s role in engine and energy control systems ties it to both aerospace growth and broader industrial trends.

Mid-tier and specialized defense exposure

Beyond the primes and core suppliers lies a group of companies offering targeted exposure to specific defense or aerospace themes. BWX Technologies (BWXT) stands out for its role in nuclear components for naval propulsion, an area with exceptionally high barriers to entry. Huntington Ingalls Industries (HII) provides concentrated exposure to U.S. shipbuilding, benefiting directly from naval spending priorities.

Kratos Defense & Security Solutions (KTOS) attracts attention for its focus on unmanned systems, drones, and hypersonics. While smaller and riskier than the primes, Kratos offers asymmetric upside if autonomous systems become a larger share of future defense budgets.

Axon Enterprise (AXON), though not a traditional aerospace firm, is often grouped within defense and security portfolios due to its technology-driven model. Its combination of hardware and recurring software revenue, particularly in law enforcement applications, appeals to investors looking for defense exposure with a technology growth profile.

Rocket Lab (RKLB) represents the most speculative corner of the universe. As a commercial space company focused on launch services and satellite systems, it offers thematic exposure to the space economy but comes with higher volatility and capital intensity.

Cyclicality, valuation, and investor preference

Not all names in the universe enjoy equal favor at all times. Companies such as General Electric (GE), now increasingly focused on aerospace, and Textron (TXT), with exposure to both defense and business aviation, are often viewed through a more cyclical lens. Materials and components suppliers like ATI and Carpenter Technology (CRS) benefit from aerospace demand but are more sensitive to input costs and industrial cycles. What differentiates long-term favorites from the rest is not simply growth, but the quality of that growth. High-margin aftermarket revenue, long program life cycles, and pricing power tend to command premium valuations—and sustain them.

The investment takeaway

The U.S. aerospace and defense sector today is not a monolith. Within the same ETF or index, companies can have vastly different risk profiles, growth drivers, and capital return characteristics. While defense primes offer stability and geopolitical insulation, suppliers and niche players often provide superior long-term compounding.For many investors, the optimal approach combines both: anchoring portfolios with primes such as Lockheed Martin or RTX, while allocating incremental capital to high-quality suppliers like TransDigm, HEICO, and Howmet. Around this core, selective exposure to thematic names such as Kratos, Axon, or Rocket Lab can add upside without dominating risk. As defense budgets rise and commercial aerospace normalizes, the sector’s appeal lies less in short-term catalysts and more in structural durability. In that sense, aerospace and defense increasingly resemble a long-duration asset class—one where patience, selectivity, and an understanding of business models matter far more than headlines.