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The New Arms Race: Our Defense Stock Picks
Defense spending is accelerating and the winners are already emerging. Here's who we like.
1 active position, 2 closed since Jun 2026.
Last trade Jul 13, 2026
Positions
Average open return ••• across 1 position. 2 closed: 2 losses. Scores as of Oct 11, 2026.
| Ticker | Opened | Entry | Now | Since pick | Target | Upside | LikeFolio Score | Main Street | Wall Street | Call |
|---|---|---|---|---|---|---|---|---|---|---|
| MRCYMercury Systems | Jun 2026 | ••• | ••• | ••• | ••• | ••• | 88 | 86 | 48 | Buy |
Closed
| Ticker | Opened | Closed | Entry | Exit | Realised | Outcome | Note |
|---|---|---|---|---|---|---|---|
| KTOSBuy | Jun 2026 | Jun 2026 | ••• | ••• | ••• | Stopped out | |
| RDWBuy | Jun 2026 | Jul 2026 | ••• | ••• | ••• | Stopped out |
“Giants like Lockheed and Northrop are guiding for 4–5% growth on a massive defense budget. The smaller pure-play specialists — drone builders, electronic warfare suppliers, hypersonic test platforms — are posting 20%+ revenue growth with record backlogs. The primes are spread across the entire budget. These companies are concentrated in the lines that are growing fastest, and that shows up in the numbers.”
Andy Swan, thesis & conviction
The thesis
The U.S. defense budget just crossed $1 trillion for the first time, and the FY2027 proposal pushes it to $1.5 trillion — a 44% increase. The money is disproportionately flowing into next-gen capabilities: autonomous drones, AI-enabled systems, electronic warfare, and hypersonics. The biggest winners won't only be the legacy primes. They'll be the smaller, specialized companies with record backlogs that the Pentagon can't modernize without.
The evidence
MRCY Backlog YoY Q3 FY26+19.4%
KTOS Q1 2026 Organic Rev Growth+15.8%
RDW LikeFolio Score+8% MoM
Buy MRCY
Entered ••• on Jun 8, 2026. Now •••, ••• since pick.
Target •••Stop •••
LikeFolio Score88
Main Street86
Wall Street48
Price and score chart
Scores as of Oct 11, 2026
“Mercury Systems is a pure-play defense electronics company powering the hardware upgrades the Pentagon is prioritizing right now, and the demand signals we're tracking show that momentum is real and growing. The programs MRCY is embedded in aren't going away regardless of budget cycles, which makes this a name you can hold with conviction.”
Landon Swan, data & evidence
This portfolio has 1 open position.
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Andy Swan & Landon Swan
LikeFolio Intelligence
“When the Pentagon's customer shifts from incremental upgrades to a generational technology overhaul, the specialized suppliers become irreplaceable. KTOS and MRCY aren't chasing the budget — the budget is chasing them.”