10 Defense Stocks to Buy to Go on the Offensive

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Market value: $108.9 billion

Dividend yield: 2.0%

Just because a company makes military hardware or provides logistics solutions to the Department of Defense doesn’t mean that’s the only thing that company can or should so. Indeed, in that defense-spending can also be cyclical, it’s wise for these outfits to diversify outside of the defense sphere.

Enter United Technologies (UTX, $135.47). Fraj Lazreg, Portfolio Manager of Investors’ Advantage Portfolios, likes the deep and wide portfolio of products that UTX brings to the table, explaining that its major divisions are “industry groups that operate independently and complement each other through the various economic cycles.” Those core units are, by the way, Pratt & Whitney, which manufactures and services commercial and military aircraft engines; Otis, the world’s largest manufacturer and servicer of elevators and escalators; and UTC Climate, which makes heating, ventilation and air conditioning equipment; and UTC Aerospace Systems.

If the company does end up splitting itself into three standalone entities, as CEO Greg Hayes has said he’s mulling, the defense segment of the company is its Pratt & Whitney jet engine arm and UTC Aerospace Systems. Those units stand to benefit the most from the broad expansion of defense-related spending.

For now, however, the product mix allows for steady sales and earnings growth. Last year’s organic revenue growth of 4.0% is to be followed by top-line growth of 5.8% this year and 5.9% growth next year. Earnings are growing at an even better clip.

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