President Trump has shifted the U.S. stance on European defense, leaving the European Union to focus more on its own arms manufacturing and production. The main reason is that the United States no longer sees the purpose of supplying Ukraine with defense supplies as Russia keeps attempting to occupy it. Now that President Trump has managed to de-escalate the situation through diplomatic talks between the two presidents, there is no need to maintain a negative trade balance.
With this in mind, countries like Germany have nearly tripled their defense spending, or at least their budgets. What this means for investors is a hidden opportunity, one that most will let pass by them without a second thought, as most of the price action has been centered in European arms manufacturing names. However, the reality is that this shift to European manufacturing will be good for American aerospace and defense stocks.
As parts and equipment from companies like Boeing (NYSE:BA), Lockheed Martin (NYSE:LMT), and even Rtx Corp (NYSE:RTX) are needed for these European manufacturers to fulfill new orders, what’s good for them is also good for their American counterparts. This is where investors can greatly benefit from the shift into European manufacturing.
1. Institutions Are Moving Into Boeing Stock Early
Institutions have teams of experts tracking global trends, giving them an edge over regular investors.
As of February 2025, those from UBS Asset Management decided to boost their holdings in Boeing stock by 14.9%, bringing their net position to a high of $502.9 million today and sending a new vote of confidence for investors to consider that this company is one of the first choices for the big capital to tap into.
Considering that Boeing stock now trades at 78% of its 52-week high and has trended near its lows for over a year, investors could safely assume that the worst-case scenarios in Boeing have somewhat been priced in already. If this is the case, then the company offers a fantastic risk-to-reward setup for bulls looking to profit from this situation.
It looks like Wall Street analysts have caught onto this new theme in the global defense space, as those from Citigroup have now reiterated a Buy rating on Boeing, this time also keeping a valuation on it as high as $210 per share. This not only calls for a new 52-week high in the company but also for a net implied upside of 36% from where it trades today.
2. A Subtle Sign of Confidence in Lockheed Martin
Markets subtly tell everyone what names they like for the coming months through valuation metrics, particularly their spreads to the rest of the market or a specific peer group. When it comes to Lockheed Martin, one valuation metric makes it clear that this is a current market favorite.
By trading at a price-to-book (P/B) ratio of up to 17.4x, Lockheed Martin calls for a significant premium over the rest of the aerospace sector’s average valuation of 5.4x today. While some value investors might have a hard time understanding how this is a good thing, the reasoning is simple.
Markets typically have a good reason and justification for overpaying in a specific name, and this time, it seems that the European and American defense situation justifies this premium today. The opportunity comes from the price not catching up to this market view yet.
As Lockheed Martin trades at only 76% of its 52-week high, investors have a similar setup to Boeing stock, where the risk-to-reward looks attractive with much more upside compared to the downside.
3. Price Action Favors Raytheon Stock
If price action is any indication of future success, then Raytheon (NYSE:RTN), also known as RTX, takes the podium in today’s list, as the stock trades at 95% of its 52-week high to place it in definite bullish territory.
Just like the thesis behind Boeing and Lockheed Martin, Raytheon is just as exposed to being an institutional favorite today.
As of February 2025, those from UBS Asset Management diversified their Boeing bets by boosting their Raytheon holdings by 2.9%, accumulating a stake of up to $701 million today, riding on the price action momentum that has been demonstrated recently.
When investors check with Wall Street analysts, the story keeps repeating itself through a consensus price target of $163.4 per share, calling for a net upside of 27.5% from where the stock trades today, not to mention a new 52-week high breakout to reiterate the fact that this defense thesis has some meat to it.