In its recently released defense budget proposal for 2022, the Pentagon is seeking $715 billion. This amount reflects a $10 billion increase from its 2021 budget. In President Biden’s view, the U.S. should now seek to end “forever wars,” while investing in cutting-edge military capabilities. We think this suggests solid growth prospects for military contractors Lockheed Martin (LMT), General Dynamics (GD), L3Harris (LHX), and Textron (TXT). So, it could be wise to scoop up their shares now. Read on.The defense industry doesn’t often attract heightened investor attention because it doesn’t typically deliver growth prospects that are as solid as, say, the tech and other high growth industries. However, defense stocks do provide stability thanks to these companies’ long-term contracts with the government.
The Biden Administration’s proposed 2022 defense budget, which was released last month, seeks a colossal $753 billion for national defense. Within this amount, the Department of Defense (DOD) is asking Congress for $715 billion for funding weapons programs and key national security priorities. Given the uncertain global geopolitical environment currently, with emerging threats from China and Russia, this year's budget proposal is considered important. And investors’ interest in the sector is evidenced by the Invesco Aerospace & Defense ETF’s (PPA) 9% returns over the past three months.
The Pentagon's proposed procurement of advanced military equipment to replace aging equipment that is currently in service, along with technological advances, is expected to accelerate the defense sector’s growth. So, we think, aerospace and defense companies Lockheed Martin Corporation (NYSE:LMT), General Dynamics Corporation (NYSE:GD), L3Harris Technologies, Inc. (NYSE:LHX), and Textron Inc . (NYSE:TXT) could witness solid growth.