3. Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 53
Lockheed Martin Corporation (NYSE:LMT) is a security and aerospace company that specializes in the research, design, manufacture, and sustainment of technology systems, products, and services worldwide. It operates through four segments – Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space. It is one of the top aerospace stocks to consider.
On February 6, Scott Deuschle, an analyst at Credit Suisse, upgraded Lockheed Martin Corporation (NYSE:LMT) from Underperform to Outperform and raised the price target from $427 to $510. The decision was based on Credit Suisse’s revised industry outlook, increased confidence in Lockheed Martin Corporation (NYSE:LMT)’s growth prospects, and a convergence of the firm’s out-year EBIT growth forecasts with those of Northrop Grumman. According to Credit Suisse, this suggests that Lockheed Martin Corporation (NYSE:LMT)’s relative valuation multiple will improve. The previous Underperform rating was mainly due to a weak book-bill ratio, but Credit Suisse noted that the company has now reported three consecutive quarters with a ratio of over 1.0, indicating a positive trend.
According to Insider Monkey’s Q4 data, 53 hedge funds were long Lockheed Martin Corporation (NYSE:LMT), and John Overdeck and David Siegel’s Two Sigma Advisors is a significant position holder in the company, with 886,300 shares worth $431 million.
Here is what Vltava Fund has to say about Lockheed Martin Corporation (NYSE:LMT) in its Q3 2022 investor letter:
“LMT is one of the world’s largest aerospace and defense companies. The war in Ukraine has reminded investors and the wider public just how important these companies are. The aerospace and defense industry in the USA is an established oligopoly. This means that a few large firms play a dominant role. While collectively they comprise an oligopoly, individually they often have monopoly positions in particular narrower segments. Their main counterparty is the US government, a key customer in what is known as a monopsonist position. This is a rather unusual situation, but one that is very advantageous for companies such as LMT.
LMT has a strong and long-term sustainable competitive advantage ensuing from the fact that its products are developed and manufactured at an extremely high level of technology and complexity, its development and contract cycles are measured in decades, and the costs for the government to switch to alternative suppliers are high. Moreover, part of the production is classified as secret, which further takes the wind out of the sails of potential competitors. This results in a very high return on capital and admittedly a slowly but steadily growing business.
In most NATO countries, which are LMT’s customers, defense outlays are based upon the size of GDP. This is currently growing very fast in nominal terms due to inflation in most countries. A number of countries have also announced significant increases in defense budgets, whether it be Germany, which aims to get to the NATO-agreed 2% of GDP, or Poland, which wants to spend more than twice as much on defense…” (Click here to see the full text)
