ACCE Defense & Aerospace sits at NAV 1003.29 with RTX, LMT, GD, HII, and NOC as top holdings. Here's what the weights reveal about the sector in 2026.
The ACCE Defense & Aerospace index sits at a NAV of 1003.29, a figure that tells only part of the story. The composition underneath it reflects a deliberate tilt toward prime contractors with long-cycle government programs, away from the more volatile sub-tier suppliers and commercial aerospace plays. Ten names make up the index. The top five alone account for 70% of the weight.
This is not a passive bet on defense spending headlines. The weighting structure makes specific claims about where durable earnings power sits inside the sector.
What the Index Holds and Why the Weights Matter
Raytheon Technologies (RTX) leads at 16%, followed by Lockheed Martin (LMT) at 15%, General Dynamics (GD) at 15%, Huntington Ingalls Industries (HII) at 14%, and L3Harris Technologies (LHX) at 14%. Northrop Grumman (NOC) comes in at 11%. The remaining four names, TransDigm Group (TDG), Howmet Aerospace (HWM), V2X (VVX), and Air Industries Group (AIR), fill out the tail with weights between 3% and 5%.
The concentration in the top six is a feature, not an oversight. RTX, LMT, GD, HII, LHX, and NOC collectively operate across every major platform category: missiles and air defense, nuclear submarines, fighter aircraft, space systems, and electronic warfare. These are businesses with multi-decade program lifespans, cost-plus contract structures on many programs, and customer relationships that are effectively sovereign.
The 11% allocation to Northrop Grumman (NOC) deserves attention. NOC is the prime contractor on the B-21 Raider bomber program, which is arguably the single most consequential new defense platform in the current U.S. budget cycle. That program alone provides a revenue runway measured in decades, not quarters.
The Tail Positions: TDG, HWM, VVX, AIR
The four smaller positions serve a different purpose. TransDigm Group (TDG) at 5% brings a different earnings profile to the index: highly proprietary aftermarket parts, pricing power that has historically outpaced inflation, and margins that most industrial businesses cannot approach. TDG is not a pure defense name, it has significant commercial aerospace exposure, but its aftermarket model makes it structurally less cyclical than a pure OEM supplier.
Howmet Aerospace (HWM) at 4% supplies engineered components, primarily titanium and nickel superalloy structures, to both defense and commercial airframe manufacturers. As production rates at Boeing and Airbus recover from years of disruption, HWM sits in the supply chain at a point that is difficult to replicate quickly.
V2X (VVX) at 3% and Air Industries Group (AIR) at 3% are the smallest positions. VVX focuses on defense logistics and sustainment services, a lower-margin but highly recurring revenue model. AIR manufactures structural assemblies for military aircraft. Both names add breadth without meaningfully shifting the index's center of gravity away from the large primes.
The Macro Context Driving the Sector
NATO members have been under sustained political pressure to raise defense budgets toward 2% of GDP, and several have moved above that threshold. European rearmament is a genuine multi-year spending cycle, not a temporary response to a single event. LMT, RTX, and NOC all have meaningful international revenue exposure that positions them to capture that demand.
Domestically, the U.S. defense topline has remained resilient across multiple budget cycles. Continuing resolutions create short-term noise, but the underlying program commitments, particularly in hypersonics, missile defense, and next-generation air dominance, are not discretionary in any practical sense.
The index's heavy weighting toward the large primes reflects a view that the companies with existing program relationships and cleared facilities are the ones that will absorb the bulk of incremental spending. New entrants face qualification timelines measured in years.
What the Index Does Not Hold
The absence of pure-play commercial aerospace names like Boeing or Airbus suppliers is deliberate. Commercial aviation demand recovery has been uneven, and the supply chain disruptions affecting narrowbody production have created earnings volatility that sits poorly alongside the more predictable government contract base of the primes.
The index also carries no direct exposure to satellite or space launch names outside of what flows through NOC and LHX's existing space divisions. That is a meaningful omission given the growth in defense-related space programs, but it also avoids the valuation risk embedded in pure-play space companies that are still years from consistent profitability.
RENK Group (R3NK.DE): A Cautionary Data Point
One name worth examining as a contrast is RENK Group AG (R3NK.DE), a German defense supplier that is not in the ACCE Defense & Aerospace index. RENK reported a 35.3% one-year decline in its share price as of September 4, 2026, with earnings falling 51.7% year over year despite revenue growing 1.7%. Margin compression hit despite a record order backlog, a reminder that order intake and earnings delivery are not the same thing. The stock trades at a trailing P/E of 43.6 on deteriorating earnings, a combination that explains its ACCE score of just 32/100.
R3NK.DE illustrates the risk in defense names that are priced for a growth narrative before the earnings have materialized. The ACCE Defense & Aerospace index avoids this category by anchoring to businesses with established, funded programs rather than backlog-heavy stories still waiting for margin conversion.
Honeywell Aerospace (HONA): The Recent Spinoff
Honeywell Aerospace (HONA), which completed its spinoff 38 days ago, is another name adjacent to this index. It is not currently a holding. The stock cut guidance on supply constraints shortly after listing and lost 24% in a single session. At a forward P/E of 17.7 and a 6-model fair value of $258.86 against a current price of $161.01, the gap between intrinsic value and market price is wide, but the near-term earnings visibility is clouded. The index's exclusion of HONA at this stage reflects the uncertainty that comes with any newly independent company still establishing its standalone cost structure.
The Index at NAV 1003.29
A NAV just above 1000 means the index has essentially recovered to its base level after whatever drawdowns the sector experienced. The composition, weighted heavily toward RTX, LMT, GD, HII, LHX, and NOC, reflects a bet on the durability of government-funded defense programs over a multi-year horizon. The tail positions in TDG and HWM add aftermarket and component exposure that benefits from both defense and commercial aerospace production.
The next major catalyst for the index is the U.S. fiscal year 2027 defense budget, which will set program funding levels for the names that dominate the top of the weighting. Congressional markup and final appropriations will determine whether the current program commitments translate into accelerating revenue for the primes or face another year of continuing resolution uncertainty.
