Two Defense Contractor Stocks Worth Considering With $500 to Invest

The geopolitical landscape has fundamentally shifted. While the Cold War ended decades ago, tensions continue to rise across multiple regions—from the Middle East to Southeast Asia and the South China Sea. This environment has made defense contractor stocks increasingly attractive to investors seeking exposure to long-term military spending trends. If you’re exploring where to allocate $500 across defense contractor stocks, two names emerge as particularly compelling on a valuation basis: Textron and Huntington Ingalls Industries.

The broader sector has become quite expensive as capital floods into defense equities. However, within this landscape, a handful of opportunities still trade at reasonable valuations, particularly when measured by price-to-sales ratios—a metric that has become my preferred valuation lens for assessing defense contractor stocks.

Huntington Ingalls: A Defense Contractor Building Critical Naval Assets

Huntington Ingalls operates as one of the U.S. Navy’s most significant shipbuilders, specializing in the construction of nuclear-powered aircraft carriers, nuclear submarines, and amphibious assault vessels. The company traces its roots to a spinoff from Northrop Grumman in 2011, and its stock performance tells an impressive story: the share price has appreciated eightfold since that separation, despite revenue barely doubling—a testament to both patience and the evolving value of critical defense assets.

With approximately $13.2 billion in annual sales and a market capitalization just over $13.2 billion, the company trades at roughly 1.1x sales—a valuation that appears reasonable relative to larger defense contractor peers. More importantly, the company faces a structural tailwind. As the U.S. Navy navigates growing military capabilities in the Indo-Pacific, demand for advanced naval platforms shows no signs of abating.

A significant catalyst emerged recently when the U.S. Navy selected Huntington Ingalls to design and build a new “small surface combatant” warship, replacing canceled Fincantieri-built vessels. This development carries material revenue implications, as the original program contemplated construction of 20-30 frigates—far exceeding the reduced order the Navy will place with the Italian builder.

Textron: Diversified Defense Systems Across Multiple Platforms

Textron presents a different profile within the defense contractor stocks landscape. While less prominent than larger peers, the company operates several recognizable brands. Textron Aviation produces Cessna and Beechcraft aircraft for both civilian and military applications, while Bell Helicopter manufactures the V-22 Osprey tiltrotor in partnership with Boeing for the U.S. Marine Corps.

The company’s ground systems division builds the M1117 armored vehicle for the Army and LCAC 1000 hovercraft for the Navy, while the recently acquired RIPSAW M5 robotic tank represents emerging autonomous defense capabilities.

Valued at $15.8 billion in market capitalization, Textron trades at 19 times trailing earnings and 22.7 times free cash flow. Its most attractive metric is the price-to-sales ratio, sitting just under 1.1x—placing it among the cheapest defense contractor stocks on this valuation basis. The diversified product portfolio provides revenue stability across different customer segments and military branches.

Comparing the Two Defense Contractor Opportunities

Both companies trade at approximately 1.1x sales, an uncommon valuation discipline in today’s expensive defense sector. Yet they differ in strategic positioning: Textron offers exposure to aviation and diverse systems, while Huntington Ingalls provides concentrated exposure to naval expansion driven by Indo-Pacific dynamics.

The recent Navy contract announcement gave Huntington Ingalls’ stock a tangible catalyst, with shares rallying 4% following the news. This event underscores the asymmetric upside potential within defense contractor stocks when geopolitical developments translate into actual procurement decisions.

For disciplined investors with $500 to allocate, both stocks merit consideration. However, Huntington Ingalls presents a more compelling near-term opportunity given the explicit Navy demand signal and potential for substantial revenue expansion as the new frigate program unfolds. The company’s specialized position in naval construction, combined with historically underappreciated valuation, creates an attractive risk-reward dynamic for those seeking defense contractor stocks exposure at reasonable entry points.