During the week that ended on February 14, the stocks of many national security companies dropped significantly. The main cause of the decline was a statement by President Donald Trump. Specifically, the president said that America’s defense budget could be cut in half if Russia and China agree to make similar reductions. Such a deal, however, would be extremely complicated and consequently unlikely to materialize. Plus, in a best-case scenario, it would take many months if not several years for these complex, three way talks to result in a deal. For all of these reasons, I believe that the resulting drop in defense stocks is likely an excellent buying opportunity.
Further, I think that the stocks of medium-sized companies are often more attractive than those of their small and large peers. That’s because, unlike large companies, medium-sized firms can grow very rapidly and unlike small companies, they have very little chance of going bankrupt.
Top 3 Midsize National Security Stocks
Here are the top three midsize national security stocks to consider adding to a defense portfolio.
1. Viasat (VSAT)
On Jan. 22, satellite services provider Viasat announced that it would, along with three other firms, equip NASA with “commercial ground and space (communications) service.” The space agency’s spacecraft will utilize VSAT’s network to communicate with personnel on the ground from low Earth orbits.
VSAT’s inclusion in the five-year contract, which is worth a total of at least $4.8 billion for all companies involved and can be extended for another five years, suggests that NASA thinks highly of VSAT’s technology. And given Trump’s apparent deep dedication to the space program (he has vowed to seek to send astronauts to Mars), VSAT is well-positioned to benefit from elevated spending by NASA in the coming years.
VSAT has a very low price-to-sales ratio of 0.26 times.
2. AST SpaceMobile (ASTS)
AST has developed a space-based cellular broadband network that can provide coverage to everyday consumer smartphones, Like Viasat, AST looks poised to benefit from the Pentagon’s strong desire for satellite-based communications services.
In 2023, the Defense Department started an initiative called “Proliferated Low Earth Orbit (PLEO) Satellite-Based Services,” and AST was included in the program. ASTS was one of 20 suppliers in the program, which started with a $900 million budget ceiling. Towards the end of last year, however, the ceiling was increased tremendously to $13 billion,
Also noteworthy is that Alphabet (GOOG, GOOGL), Verizon (VZ), and Vodafone (VOD) have all invested in AST.
In December, Vodafone, the huge UK-based telecom company, signed a “a definitive long-term commercial agreement” with AST that will last “through 2034.” The companies reported that the deal “establishes the framework for Vodafone to offer space-based cellular broadband connectivity in its home markets, as well as to other operators via its Partner Markets program.”
And on January 31, the FCC authorized AST to launch five commercial satellites in order to test their ability to provide ” voice, full data, and video applications” to “unmodified” smartphones operating on the spectrums of AT&T (T) and Verizon (VZ).
AST reports that it is looking to “target (roughly) 100% geographical coverage.”
Given the revolutionary potential of AST’s technology, and its deals with the Pentagon and Vodafone, I believe that its current $9.16 billion market capitalization is quite low.
3. Intuitive Machines (LUNR)
Intuitive Machines’ vessel was used in NASA’s uncrewed mission in February 2024. And in April 2024, NASA selected LUNR, in partnership with two other companies, to develop a lunar terrain vehicle that is supposed to be used to transport astronauts on the moon’s service. The combined deal could be worth as much as $4.6 billion.
Meanwhile, last month Intuitive announced that it had delivered its latest lunar lander, Athena, to NASA. The lander is slated to be launched “no earlier than February 26.,” the company reported in January.
Intuitive CEO Steve Altemus stated that its “commitment to flying missions reinforces our broader efforts of developing a heavy cargo lander, establishing a lunar data relay satellite constellation, and providing sustainable infrastructure services at the Moon to enable further exploration of the solar system.”
In light of the company’s extensive involvement with NASA and the Trump administration’s strong commitment to the space program, I believe that LUNR stock, which has a market capitalization of $1.82 billion, is tremendously undervalued.
*This article is intended to be informational only; it is not financial advice.
