Best Stocks to Buy 2014: Three Stock Picks from the Defense Sector

best stocks to buy 2014The defense sector is chock full of some of the best stocks to buy in 2014.

An increased volume of legislation is being passed to support the defense sector of the U.S., like U.S. President Barack Obama's recent sign-off on the National Defense Authorization Act for the 2014 fiscal year, making this area ripe for future growth.

Additionally, due to geopolitics and seemingly widespread unrest, there's an overall bullish outlook for the sector - especially when one considers technological progress and cost-cutting measures being implemented by many defense companies.

Here are three of the best stocks to buy 2014 in the defense sector...

Three Promising Defense Stock Picks for 2014

Kratos Defense & Security Solutions Inc (Nasdaq: KTOS) is a U.S.-based company that provides war fighter solutions and security services, including information technology services. Its main services include command, control, communications, computing, combat systems, and advanced informational technology services.

The company posted revenues of $235.7 million for the quarter, compared to the forecast of $251.73 million, which led many analysts to downgrade the stock from "Outperform" to "Neutral."

The slight dip in share price makes this the perfect time to invest. With shares currently trading at $7.33, Kratos is an excellent opportunity for a forward-thinking investor.

Despite highs and lows, Kratos shares have seen growth over the past year, with shares trading by around $2.50 more per share than in March 2013.

However, this is not the only reason for a bullish outlook on KTOS stock. The new legislation, along with increasing unrest in the Crimea region, can only lead to increased earnings for defense companies, especially those offering information technology services.

Northrop Grumman Corp. (Nasdaq: NOC) provides the Department of Defense with a wide range of products and services, including information technology, aircraft, electronic systems and more.

The bullish outlook for this stock is due to a number of reasons, including a large number of international orders. For example, South Korea recently announced plans to purchase four Northrop Grumman Global Hawks for a total of $814.63 million to monitor North Korea.

This is just one of a few orders keeping this company busy - they have a backlog of $23.4 billion that's already been funded.

The introduction of new products, such as the Triton unmanned aircraft system, along with earnings that have consistently beaten estimates, make Northrop Grumman Corp. an excellent investment. Earnings reported for the last quarter of 2014 were $2.14 per share, versus the consensus prediction of $1.75.

Northrop Grumman shares are currently trading at $121.66, up 26.24% since six months ago in September 2013. Over the past five years, NOC shares have seen tremendous growth, with stocks rising by more than 200%, earning Northrop a spot on the list of "best stocks to buy 2014."

Huntington Ingalls Industries Inc (Nasdaq: HII) is the largest ship building company in the United States and also one of the largest industrial employers in Virginia. Originally an affiliate of Northrop Grumman, it separated in March 2011.

Operating shipyards in Louisiana, Mississippi and Virginia, Huntington has recently taken over The S.M. Stoller Corp., a provider of consulting and engineering services to the private sector, as well as the federal government.

The bullish outlook for Huntington stems from a number of factors, including a forecasted growth rate of 27%. While the price-to-earnings ratio is 20, with an expected growth in profitability of 27% per annum over the next five years, Huntington is certainly a stock to watch out for.

Shares are currently trading at $99.40, up 10.43% so far in 2014. A stock price growth of almost 90% since this time last year certainly makes Huntington an interesting option for any investor looking for long-term returns.