While the broader U.S. market has surged more than 12% this year, the defense sector has barely moved, yet institutional investors are holding their ground in the space.

The NYSE Arca Defense Index has gained only 2.76% year-to-date through October 29, trailing the S&P 500’s 12.57% advance by a wide margin.

Analysts point to a combination of budget uncertainty, evolving battlefield technologies, and stretched valuations following years of elevated conflict-driven demand as the primary drags on sector performance.

Despite those headwinds, hedge funds tracked by Insider Monkey’s Q2 2026 database continue to maintain significant positions across the five most widely held defense names on American exchanges.

Bernstein’s Douglas Harned urged patience on September 23, telling investors to wait for the November 3 midterm elections before acting on any dip, describing the vote as a potential clearing event for federal budget visibility.

Harned also projected that the 2027 defense investment budget would climb more than 10%, and pushed back on fears that a Democratic election outcome would pressure military spending, citing historical trends as evidence against that concern.

Brand Clark, Director of Financial Planning at The Clark Group Asset Management, offered a longer view during a Schwab Network appearance last month, arguing that defense is a strategic portfolio holding rather than a tactical trade.

Clark noted that even a resolution to the Iran conflict would not meaningfully reduce outlays, given the need to replenish inventories and build deeper stockpiles against persistent threats from China and North Korea.

At position five, Lockheed Martin Corporation (NYSE: LMT) drew 75 hedge fund holders in Q2, down from 83 in Q1, but its third-quarter results offered a clear rebound story after a difficult start to 2026.

The defense contractor posted Q3 net sales of $20.7 billion, an 11% year-over-year increase that topped estimates, while earnings per share of $7.97 beat the consensus of $7.43 and represented a 14% gain from the prior year.

The same day it reported earnings, Lockheed announced a 10-year Pentagon agreement worth nearly $78 billion covering delivery of at least 850 F-35 Lightning II stealth fighter jets.

TransDigm Group Incorporated (NYSE: TDG) ranked fourth with 83 hedge fund holders in Q2, backed by one of the strongest margin profiles in the sector, with its EBITDA As Defined margin clocking in at 52.8% for the third quarter.

Soroban Capital Partners raised its stake in TransDigm by 21% during the quarter, becoming the largest shareholder with holdings valued at approximately $1.19 billion, ahead of AltaRock Partners at $1.17 billion and Windacre Partnership at $911 million.

TransDigm’s Q3 net sales rose 23% year-over-year to $2.74 billion, while adjusted EPS grew 13% to $10.87 and EBITDA As Defined expanded 19% to roughly $1.45 billion.

The Boeing Company (NYSE: BA) held third place with 90 hedge fund holders, though shares have fallen 6% since October 27 after the aircraft maker reported a net loss of 34 cents per share against Wall Street’s expected loss of 21 cents.

Boeing’s defense unit nevertheless delivered a 15% revenue increase to $7.9 billion, with operating margin expanding sharply to 6.2% from just 1.7% a year earlier, and defense segment backlog reaching a record $101 billion.

The company’s total order backlog hit a record $745 billion at quarter end, and a Navy contract for the F/A-XX next-generation fighter jet represents a significant future catalyst not yet reflected in those figures.

RTX Corporation (NYSE: RTX) ranked second with 92 hedge fund holders and arguably produced the most striking order momentum of any company on the list, pulling in $81 billion of new contracts during Q3 alone.

Those awards included a $22.9 billion Tomahawk cruise missile contract in August and a $20.7 billion AMRAAM missile deal in late September, pushing RTX’s total backlog to a record $340 billion.

Third-quarter revenue at RTX climbed 11% to $25 billion, beating estimates of $24.08 billion, while adjusted EPS of $2.26 surged 33% year-over-year and exceeded the analyst consensus of $1.78.

GE Aerospace (NYSE: GE) topped the rankings with 113 hedge fund holders in Q2, supported by an installed base of roughly 30,000 military and 50,000 commercial aircraft engines that generates durable long-term service revenues.

The company raised its full-year profit guidance for the second time in 2026 after reporting Q3 adjusted revenue of $13.3 billion, a 36% jump in adjusted EPS to $2.25,