In a new report, Goldman Sachs analyst Noah Poponak discussed the firm’s bullish outlook for defense stocks in 2016 and beyond. Goldman believes that a new long-term cyclical upswing in the sector has just begun.

Still Early For Defense

According to Poponak, investors still have time to get in on what will likely prove to be a long-term upswing in defense stocks. “Historically, Defense budget cycles are almost always long, and Defense stocks almost always outperform far beyond the first year of the spending upturn,” he explained.

Aerospace Remains Challenged

Goldman is not as excited about the outlook for aerospace stocks, especially original equipment (OE) names. Poponak writes that market expectations remain low for OE stocks and demand continues to slow. However, at current levels, many of these stocks maintain solid fundamentals.

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Top Picks

In the report, Goldman names FLIR Systems, Inc. (NASDAQ: FLIR), Harris Corporation (NYSE: HRS), Orbital ATK Inc (NYSE: OA), Lockheed Martin Corporation (NYSE: LMT) and Northrop Grumman Corporation (NYSE: NOC) as its top Buy-rated defense stocks.

In addition, Goldman currently has a Sell rating on Boeing Co (NYSE: BA).

Disclosure: The author has no position in the stocks mentioned.