| Written by Dan Schmidt 
The second-half rally in U.S. stocks this year has made it easy to forget some of the assets that outperformed at the start of the year. Cryptocurrencies have rallied back to their February peaks following a prolonged period of dormancy, and now commodities like gold and silver have also reached record highs. European stocks spent most of 2025 outperforming U.S. equities, although that delta has narrowed lately. However, one area of the European market that hasn’t slowed down is the defense sector. In fact, as the war in Ukraine approaches its fourth anniversary, European defense contractors are becoming more intertwined with global commerce. Today, we’ll examine three companies helping to defend Ukraine and the breakout their stocks are experiencing. European Defense Stocks Continuing Their Sharp Repricing Russia’s ambitions far exceeded its capabilities in Ukraine, and the February 2022 invasion has now turned into a grinding altercation with no end in sight. Ukraine has even begun conducting cross-border raids in an attempt to disrupt Russian supply chains. While the war has reached more of a stalemate phase than a series of dramatic battles, pressures are increasing in some areas (i.e., drone strikes), and the outcome is vital for NATO countries. Even U.S. President Donald Trump has recently changed his tune, commenting that Ukraine could regain territory with more support. Before the war, many defense and aerospace stocks in Europe were undervalued, and governments had restrictions on how much they could spend on defense. However, the Ukraine war was a shock to this system, causing European regulators to reevaluate their budgets. Reducing dependency on the U.S. has also become a goal for European governments, which has created several tailwinds in favor of the defense industry. 3 European Defense Stocks to Watch as Tensions Roll On The war in Ukraine requires advanced systems, such as integrated air defense systems, so large companies offering modern solutions will likely earn the most lucrative contracts from European governments. These three large-cap stocks appear to be among the biggest beneficiaries of Europe’s renewed defense commitments, with share prices surging to new all-time highs and structural tailwinds in place for a prolonged uptrend. Note that all three securities are American Depository Receipts (ADRs), which function differently from typical shares. Be sure to understand the contrasts before investing any capital. Rheinmetall: The Primary Beneficiary of Germany’s Debt Brake Reform German defense giant Rheinmetall AG (OTCMKTS: RNMBY) has soared to new highs following reforms in the highest levels of government. Germany’s debt brake, which limits defense spending to a certain percentage of GDP, was revised to allow the country to increase its defense budget. Rheinmetall shares were trading under $20 before the invasion began, but are now up over 2,500% in the last five years. And it's not hype or sentiment: revenue growth has been stunning, and the company posted $2.7 billion in sales in the most recent quarter. Rheinmetall started 2025 with more parabolic stock gains following a contentious White House meeting between Presidents Trump and Volodymyr Zelenskyy. 
The stock cooled down over the summer, but now evidence is emerging supporting another breakout. Shares have had strong support at the 50-day simple moving average (SMA), and this new all-time high hasn’t yet led to an Overbought reading on the Relative Strength Index (RSI). Saab: Stagnating Revenue Revived by Increased Orders Saab AB (OTCMKTS: SAABY) may be most remembered in the U.S. for its brief foray into the automotive manufacturing business, selling its diminutive vehicles with ignition keys on the floor. However, the real strength of its business lies in defense contracting. Saab sells military aircraft, watercraft, missiles, and other advanced systems, generating over $6 billion in revenue in the last 12 months. But before the war in Ukraine, Saab’s revenue was stagnating, and the stock failed to soar alongside its peers once the invasion began. What’s caused Saab’s stock to surge nearly 200% year-to-date (YTD)? A growing order book and accelerating profitability. After a brief decline in 2022, revenue has soared, growing over 20% year-over-year (YOY) each year. 
Current projections have 2025 revenue growth at 26% YOY, and the company’s Q2 2025 revenue of $2.05 billion represented a 44% YOY advance. Like Rheinmetall, Saab shares also exhibit the hallmarks of a strong technical uptrend, with support at the 50-day SMA and bullish action on the MACD. BAE Systems: A Technical Breakout Boosting Strong Fundamentals BAE Systems PLC (OTCMKTS: BAESY) is a British defense and aerospace company designing everything from vehicles and munitions to advanced cybersecurity solutions. BAE Systems might be the ‘safest’ play amongst the three defense stocks we’ve listed here today. While its growth isn’t as explosive as Rheinmetall's or Saab's, the company is massive with an $83 billion market cap and more than $28 billion in annual sales. BAE Systems also has a record backlog of orders, with over $100 billion in contracts on its books (approximately £80 billion in local currency), and has recently inked a $1.2 billion contract with the U.S. government. 
The daily chart for BAESY also shows promising potential. The stock has reached its first new all-time high since June, and the MACD is indicating that a bullish breakout may be in the works. Like its industry brethren, the stock has strong upward momentum, with support at the 50-day SMA. BAE Systems likely won’t provide parabolic gains, but it’s a steady revenue grower with a deep backlog and steady dividend.  Read This Story Online | 
