Guggenheim analyst Michael Ciarmoli sees a lot of opportunity in the beaten-up defense sector. Monday, he launched coverage of almost two dozen stocks. He has a baker's dozen buys, with some surprising price targets.

In particular, he sees Applied Aerospace & Defense stock around $30 a share, up about 150% from recent levels. "We view AADX as a merchant supplier of established and proven military subsystems and components that is poised to benefit from favorable growth trends across all of its market domains," wrote Ciarmoli. Those domains include the aerospace, defense, and space industries.

It's a bold price target. However, the average upside Ciarmoli sees on his 13 Buy-rated names is roughly 50%.

The other Buy-rated names are: nuclear technology and service provider BWX Technologies, aerospace parts supplier Curtiss-Wright, defense supplier DRS, materials suppliers Howmet Aerospace and Hexcel, drone and drone technology providers Karman and Kratos Defense & Security Solutions, electronics supplier Mercury Systems, engine technology provider Woodward, bearing provider RBC Bearings, and traditional contractors L3Harris Technologies and Northrop Grumman.

York Space Systems, Moog, and TransDigm are three examples of Hold-rated stocks.

Going through each investment thesis might not be practical. Overall, Ciarmoli calls fears driving the defense sector "overblown."

Coming into Tuesday trading, many defense stocks had dramatically underperformed the market since the Iran War began. Northrop shares were down almost 30%. Investors are partly worried that a split Congress after the midterm elections will result in spending gridlock. Backlogs, however, are in good shape, and the base budget will be more than enough to support shares.

"We would be telling investors to be buyers on this pullback, as we believe the current spending and trends impacting the sector will be sustaining, secular, and durable," says Ciarmoli. Those trends include higher spending on autonomous weapons systems, space, and rebuilding depleted munitions stocks.

Shares of the Buy-rated names were up a little, on average, in midday trading, while the S&P 500 was down 0.5%. The average move isn't big, partly because of Ciarmoli himself. He isn't new. He previously covered the sector at Truist and had some similar ratings and thoughts.

His new job and report, however, give investors a chance to reassess the defense sector after a couple of difficult months.