Leidos Holdings is a provider of technology and engineering services to defense, intelligence, homeland security, and healthcare customers. The shares are a component of the S&P 500. Based in Virginia, the company has about 47,000 employees.

The major indices are higher at midday on Tuesday, with the Nasdaq showing particular strength, about 2%. Still, overall it has been a tough month, with the Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 all likely to end March down more than 6%. The month came in, as expected, like a lion - but the lamb never made an appearance. The yield on the 10-year note is at 4.33%, crude oil is up 1% at $104 per barrel (after hitting $106 overnight) and the VIX volatility index is around 27.

Despite bursts of outperformance, small- and mid-cap stocks (SMID) have underperformed large-caps year to date -- as they have over the past six years. But they may be in a better position to generate market-beating returns going forward. SMID companies tend to focus on domestic markets, so their businesses could be less disrupted by the trade and tariff debate, fallout from unrest in the Middle East, the Russian invasion of Ukraine, issues in China, or other geopolitical developments. As well, the prices of SMID stocks generally are lower than the prices of large-caps, with the P/E ratio on the Russell 2000 SmallCap Index at 20, compared to a trailing P/E of 29 for the S&P 500. Finally, there are long stretches in the record books when SMID stocks have outperformed large-caps. SMID risks do carry risk, but diversified investors look to have exposure to small- and mid-caps based on the long-term performance record.

Every January, Argus identifies specific investment themes that we think will be relevant in the year ahead. This week, we drill down into our sixth theme for 2026: U.S. Competitive Advantage, Aerospace and Defense. This theme was selected before the war in Iran began. Aerospace and Defense design and manufacturing is a core competencies of the U.S. economy. In our view, the sector is positioned for solid growth over the next few years. Defense spending data for 2024 shows that the United States, China, and Russia are the top three spenders globally, with the U.S. spending nearly $1 trillion. Global military expenditure reached a record high of over $2.7 trillion in 2024. Looking ahead, forecasts call for the industry to grow at a CAGR of 6% through 2028. Drilling down, the global airline industry bodes well for commercial aerospace demand over the next several years. Airline passenger levels and airline revenues are growing at a healthy pace -- and with international markets reopened, we believe the industry will be able to recover a substantial amount of its pre-COVID-19 revenues and profitability into 2027. We also expect solid military spending over the next few years, as U.S. spending accounts for nearly 40% of all global military spending. According to the U.S. Bureau of Economic Analysis, annualized federal spending on national defense was running at an $871 billion rate in 2Q25. That's up 6% year over year. On top of the country's typical strong commitment to defense spending, the budget has been influenced by the ongoing Russian invasion of Ukraine, the current war in Iran, rising inflation, and other factors. The current geopolitical environment should keep spending high for some time to come. BUY-rated stocks from the Argus universe that we think are positioned to take advantage of the trend include the following.