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As one part of his "Make America Great Again" agenda, President Donald Trump is proposing the construction of a "Golden Dome" defense system. This comprehensive, mobile air defense system will be similar to the Golden Dome that protects Israel. That presents a significant opportunity for defense-related stocks. |
Investors older than 50 remember when the Reagan administration first proposed a space-based defense system. Derisively named "Star Wars" by its critics, it's pretty much identical to the Iron Dome that protects Israel. |
However, the entire country of Israel is approximately the size of the state of New Jersey. A similar system to protect the entire United States means amplifying that project on a massive scale, featuring: |
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That's one reason the proposed defense department budget in President Trump's "big, beautiful bill" is set at nearly $1 trillion. While many companies stand to benefit from this project, initially, it may help to think big. Investors should consider large-cap stocks that have a proven track record of working with the U.S. Department of Defense (DoD). These are the companies that will likely be among the biggest winners, and with good reason. |
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Palantir Could Be the Software Backbone of a Golden Dome |
Palantir Technologies Inc. (NASDAQ: PLTR) generates about 55% of its revenue from U.S. government contracts. A significant percentage of that comes from the DoD. In fact, some investors have cited the company's dependence on government contracts as a reason to avoid PLTR stock and its lofty valuation. |
However, if a Golden Dome were to be constructed, it would require the kind of software that Palantir is known for (i.e., real-time operational dashboards and autonomous threat response). More broadly, the company's software platform could be a critical component in integrating data from satellites, radar, and drones across the country. |
To that end, it's important to note that Palantir is already part of the Space Development Agency (SDA), which provides a role in space-based missile warning and tracking. |
PLTR stock is up more than 489% in the last 12 months, making it one of the best-performing technology stocks. The sharp spike in the PLTR stock price is drawing mixed reviews from analysts. The Palantir analyst forecasts on MarketBeat have a consensus Reduce rating on the stock with a price target of $83.95. |
However, investors would do well to note that even the most bearish analysts continue to raise their price targets, and the company's involvement in a project like the Golden Dome would likely be the next $1 billion contract that will quiet the naysayers. |
Lockheed Martin Is an Example of Buy the Best |
If Palantir may provide the software backbone for a Golden Dome, Lockheed Martin Corp. (NYSE: LMT) will likely be tapped to deliver a significant portion of the hardware. Lockheed Martin is the largest U.S. defense contractor in terms of revenue and market cap. In fact, 75% of the company's global revenue comes from the defense market. |
Lockheed Martin already provides the hardware (i.e., the missiles) for THAAD, PAC-3, and Aegis BMD programs, all of which are foundational to the idea of missile defense. The United States will be unlikely to reinvent the wheel with a Golden Dome which gives Lockheed a leg up. Plus, the company has already made significant investments in developing laser and microwave-based defenses that would likely be a part of the system. |
And unlike Palantir, LMT stock trades at a reasonable valuation of around 17x forward earnings. That leaves room for growth, and investors also get an attractive dividend. |
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L3 Harris Is a Company That Can Make All the Pieces Fit |
One of the most appealing aspects of a Golden Dome project for investors is the need for companies that bring different disciplines to the table. For L3 Harris Technlogies Inc. (NYSE: LHX) that means providing world-class sensor and communications systems. |
That plays into the company's core competencies, as evidenced by its technology already being used in Israel's Iron Dome. It's not a big step to believe that the technology is likely to lead to significant revenue for L3 Harris. The story gets better. In 2023, L3 Harris acquired Aerojet RocketDyne, which makes the company an essential supplier for missile interceptor programs. |
LHX stock is up more than 9% since its April earnings report. At that time, L3 Harris delivered bullish guidance, including 5% organic annual revenue growth and operating margins in the 14.8% to 16% range. However, that didn't include any potential revenue from the Golden Dome. |
Written by Chris Markoch |
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