Goldman Sachs Defense Stocks: Top 5 Stock Picks

1. Lockheed Martin Corporation (NYSE:LMT)

Goldman Sachs’ Stake Value: $566,208,511

Number of Hedge Fund Holders: 52

Lockheed Martin Corporation (NYSE:LMT) is a company specializing in defense and aerospace, and is organized into four segments – Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space. It is the largest Goldman Sachs defense stock. Securities filings for Q2 2023 reveal that Goldman Sachs owned 1.2 million shares of Lockheed Martin Corporation (NYSE:LMT) worth $566.2 million. 

On July 18, Lockheed Martin Corporation (NYSE:LMT) reported a Q2 non-GAAP EPS of $6.73 and a revenue of $16.7 billion, outperforming Wall Street estimates by $0.28 and $810 million, respectively. 

According to Insider Monkey’s second quarter database, 52 hedge funds were long Lockheed Martin Corporation (NYSE:LMT), compared to 58 funds in the earlier quarter. John Overdeck and David Siegel’s Two Sigma Advisors is the largest stakeholder of the company, with 791,700 shares worth $364.4 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)

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