While overall market moves capture headlines, most of the action occurs at the sector level. Some sectors are hotter than others. Most of the time, tech stocks lead the market. That hasn’t been the case in 2025, amid a more defensive market.
Instead, industries such as healthcare have been leading instead. But other sectors could also start to move higher, even if the rest of the market stays lackluster.
One such sector is the defense contractor space. These companies have been flat over the past year, and in some cases two to three years.
However, rising defense spending in Europe, and budget proposals that would increase defense spending in the U.S. could push these companies higher.
Among the major traditional defense contractors, Northrup Grumman (NOC) could be attractive here. Shares have been flat over the past year, but improving trends could break out of that range in the quarters ahead.
Action to take: Northrup’s positioning in the defense space remains strong. And shares are reasonably valued at about 17 times earnings. Investors may like shares here, with an eye towards as breakout later in the year.
At current prices, Northrup also pays a 1.7% dividend, which the company has a history of gradually increasing over time.
For traders, the November $540 calls, last trading near $16.50, could see mid-double-digit returns if shares break higher in the months ahead. Traders could see lower returns if NOC simply moves to the higher end of its multi-month trading range.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.