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| By Michael A. Robinson |
The U.S. has the strongest military in the world. And it’s about to get stronger …
The White House has proposed a defense budget of $1.5 trillion for fiscal year 2027.
That’s more than double the figure that Trump asked for early in his first administration.
Make no mistake. The president wants sweeping improvements in the number of jet fighters, stealth bombers, tanks, battleships and aircraft carriers, not to mention missile defense.
Against this background, a sprawling conglomerate just announced plans to spin off its non-defense and aviation units.
By becoming a pure play, the firm also is tapping into a global military buildup.
I believe this spinoff will be very profitable for investors.
Let me show you why this storied firm that began by making specialty yarn is on pace to beat the market by 30% …
The Global Defense Buildup
One key point to remember — this military buildup isn't just an American story.
Worldwide, defense spending has increased for 11 consecutive years through 2025.
Every major power on earth is spending more.
Europe is racing to rearm, leading the effort to back Ukraine while fortifying its own borders against Putin's Russia.
China is growing its military at a relentless pace.
India is buying and building its own systems.
After the war with Iran and the terrorist group Hezbollah, Israel will no doubt be rearming.
Meanwhile, the Gulf states and Asia beyond China are also reaching deeper into their pockets for defense programs than they have in a generation.
The world has quietly made a decision. The postwar peace dividend is over.
Safety costs money. And everyone is paying the bill.
Global military spending has hit $2.9 trillion a year — and it's rising fast.
Here at home, the ambition is breathtaking. We’re talking about the Golden Dome missile defense, a rebuilt Navy and the Space Force growing faster than any branch in American history.
These aren't budget line items — they're a statement about the kind of world America thinks is coming.
This isn't a one-off surge driven by a single conflict or a single president.
This is a permanent shift in how nations see the world — and what they're willing to spend to survive in it.
The Boom in Aviation
And it’s not just a big military buildup. Aerospace is on fire as well.
The two major aircraft companies in the world are Boeing (BA) and Airbus (EADSY).
They dominate the $1 trillion commercial industry.
Boeing’s economic team projects that commercial airline demand will grow 40% by 2030.
Airbus just announced a major sale of at least 150 A220s to AirAsia. That’s the largest single order in company history.
During Trump’s trip to China, the country ordered 200 Boeing jets, with many more in the future.
These companies are also key military aerospace firms.
Germany and Spain have ordered 45 more Airbus Eurofighter jets in the past six months.
The U.S. is planning on doubling its fleet of Boeing F-15s to 267.
And there’s a new generation of electric vertical takeoff and landing (eVTOL) planes that are about to make a splash around the world.
A Humble Start
In other words, by slimming down as a defense and aerospace pure play, Textron (TXT) is tapping two huge and growing segments.
Irony abounds. The firm started as a small textile company that moved into synthetic yarns.
That landed the company a parachute contract at the beginning of WWII.
The defense sector had been TXT’s core business, but it began to diversify its holdings in the 1950s.
Over time, it had built a collection of businesses that were good but didn’t always have to do with each other.
This kind of diversification was an accepted corporate strategy for many years. General Electric (GE) and Honeywell (HON) were two shining examples of this strategy.
But in recent decades, these companies have found their diversification has become more a handicap than an advantage.
GE spun off its aerospace and military assets in 2024.
HON is planning on spinning off its aerospace division this summer.
The point is, TXT is in good company.
Textron is planning on spinning off its industrial division in the next 18 months to focus on defense and aerospace.
The new company will maintain its Textron Aviation unit.
This is where Cessna, Beechcraft and Bell Helicopter are housed.
For its part, Textron Systems will act as the full-on defense arm.
The Power of Focus
The new Textron will be much leaner and certainly more focused.
And given the growth in the defense and aerospace sectors, the timing is perfect.
Textron Aviation owns aviation legends Cessna and Beechcraft.
Both companies build commercial planes as well as modified models for intelligence and law enforcement.
Bell is a leading helicopter maker. It’s also likely that Textron will embed its cutting-edge work on eVOTLs here.
Textron Systems builds marine craft, UAVs, armored land vehicles and aircraft engines.
A Looming Market Beat
The earlier lack of focus hurt earnings.
Over the last three years the firm showed no real earnings growth.
But in the most recent quarter earnings came in at 13%.
This spinoff promises plenty more upside ahead.
For example, a study at Penn State University examined 30 years of market data covering 174 spinoffs.
In the first three years of operations, these new companies showed a price increase of 76%, beating the S&P 500 by 31%.
That could be just for starters.
After all, as we have seen, aviation and defense spending will rise for many years to come.
And that makes TXT a great long-term play.
Best,
Michael A. Robinson
P.S. I recently gave a presentation on another proven way to beat the market. This one involves IPOs … but not by buying them.
Instead, it’s about buying the suppliers to the biggest IPOs. And there’s no bigger IPO in the world right now (or ever) than SpaceX.
Watch this presentation for the absolute best way to play it.
