Summary
- Lockheed Martin has taken a beating over the past week, which has created an attractive entry point for investors.
- Defense spending has steadily increased over America's 200+ years of existence, and it shows no signs of abating.
- Even if it were to abate, Lockheed Martin has an inherent hedging mechanism: its space and aeronautics segment.
- I rate Lockheed Martin as a buy.
Source: LockheedMartin.com
Investment Thesis
My secular bullishness on aerospace and defense stocks is predicated on five key pillars.
- The international arms race that will continue to accelerate, at least for the next 50-100 years. If it's not China next decade, it will be India or the Middle East. If it's not those countries, it's space defense as we travel into the cosmos.
- As the economy continues to globalize, a global police force will be required.
- Space is a growing frontier. Just as a city, county, state, or globalized economy needs a defense/police force, so too will space.
- Defense spending is vital to national security, which means the U.S. government cannot source military equipment from international defense contractors. This is a crucial factor, which will never change, especially in light of events such as the coronavirus, which have sparked national concern regarding our reliance on Chinese supply chains.
- Defense companies' dispersed presence throughout the United States creates an environment wherein congress is incentivized to maintain the defense budget, else they lose jobs in their districts.
These five pillars serve as the basis on which I will construct the following investment narrative, and in light of these five pillars, I have built stakes in Lockheed Martin (LMT), L3Harris Technologies (LHX), and Northrop Grumman (NOC).
