2 No-Brainer Defense Stocks to Buy With $500 Right Now

The U.S. defense sector is entering a golden age, driven by a perfect storm of geopolitical tensions, surging defense budgets, and a global push to modernize military capabilities. With the 2025 U.S. defense budget hitting $924.7 billion and global defense spending projected to reach $2.5 trillion in 2024, companies like Lockheed Martin (LMT) and Northrop Grumman (NOC) are poised to benefit from a structural shift in government priorities. For investors seeking stable, high-conviction plays, these two defense giants offer a compelling mix of long-term contract visibility, robust free cash flow, and analyst optimism. Here's why they're no-brainer buys with $500.

1. Lockheed Martin (LMT): The F-35 Engine of Growth

Lockheed Martin remains the cornerstone of U.S. defense innovation, with its F-35 Lightning II program serving as a cash-flow engine. In Q1 2025, the company generated $955 million in free cash flow, down from $1.3 billion in Q1 2024, but its full-year guidance of $6.6 billion to $6.8 billion underscores its resilience. This stability is fueled by long-term contracts like the 15 billion "Pacific Fortress" initiative which aims to bolster U.S. military presence in the Indo-Pacific region.

Morgan Stanley's equal-weight rating for LMT reflects confidence in its ability to outperform peers on earnings per share (EPS) and free cash flow growth. Meanwhile, the F-35 program-critical to U.S. air superiority-continues to drive demand, with upgrades and maintenance extending the jet's service life into the 2060s. With defense budgets prioritizing next-gen stealth and AI-powered systems, Lockheed's dominance in aerospace primes it to capture a disproportionate share of the $1.01 trillion 2026 defense budget.

2. Northrop Grumman (NOC): The Stealth Innovator

Northrop Grumman, often overshadowed by its rival, is a masterclass in strategic innovation. Its B-21 Raider stealth bomber program and advanced cyber-defense systems position it as a key player in the U.S. military's shift toward AI and space-based capabilities. In Q1 2025, Northrop secured a $972 million contract for Air Force modeling and simulation, a testament to its critical role in training and system development.

While Morgan Stanley recently trimmed its price target for NOC from $720 to $714, it maintained an "Overweight" rating, citing the company's mid-single-digit organic sales growth and projected free cash flow of $3.1 billion to $3.5 billion for 2026. Analysts remain bullish, with a mean price target of $667.85 and a "Moderate Buy" consensus. Northrop's focus on high-margin, long-duration contracts-such as those tied to the B-21 and hypersonic missile programs-ensures a steady stream of revenue even as geopolitical risks evolve.

Why These Are No-Brainer Buys

Both LMT and NOC are insulated from typical market volatility due to their reliance on multi-decade government contracts. The U.S. defense budget's 13.4% increase in 2026 and the global defense industry's projected 8.2% compound annual growth rate through 2032 create a tailwind that these companies are uniquely positioned to harness. For $500, investors can allocate to both stocks, balancing LMT's broad-based aerospace dominance with NOC's niche expertise in stealth and cyber.

In a world where geopolitical risks are no longer hypothetical, defense stocks offer a rare combination of stability and growth. With Morgan Stanley's price targets and analyst consensus backing their potential, Lockheed Martin and Northrop Grumman are must-own plays for the long term.