SEEN THAT SHINY NEW GLOW ?  THAT’S OUR DEFENSE INDUSTRY.  IT’S CALLED BELIEF.

 

StockJaw’s 4th of July look at Lockheed Martin and the Trump Factor.  And X-Factor Marillyn.

 

 

 

 

Yet early on it was all damage, market-wide.  The Tweets ugly-sawed individual stock prices.  Lockheed became  a Twitter target.  We bought.  Trump was expressing some funky glow all his own.  It started deep in his gut, a glow about the people, and the F-35’s pricing structure.  Trump was now president and again with the phone.  Victory Twitter Trump Season One.

 

 

No one streaming across the Trump  view screen dodged this early digital fire.  Welcome to Trump land.  Lockheed’s turn came.  Following the Tweets, came Lockheed Martin President, CEO, and Director of the Board, Marilyn Hewson.

 

 

 

Marillyn Hewson met with the president–twice in quick succession.  “Good” was the tablet carried back to shareholders.  How often the diplomatic personal touch works pure magical deliverance.  Lockheed looked fabulous and faded from the headlines.

 

 

 

The above is what’s known in baseball as a “walk-off home run.”  This outcome didn’t just happen.  Further, this in no way rests the pricing question.  That’s a dance and it proceeds.

 

 

 

So is Lockheed a buy?  What’s to like?  How about 37% of Lockheed’s 2016 revenue was captured through government contracts for which Lockheed was the sole bidder?  Is that like being spotted 37 points?  How about a 2.61% dividend, and a .61 beta?  What about a possible U.S. government supported monopoly in fighter aircraft by 2020?  What about an end to sequestration soon?    What about Marillyn?

 

 

 

Marillyn Hewson is a sleek and impressive figure.  No surprise that she created a clear presence within Trump’s psyche.  Much like big cats, Trump understands symbols intuitively.  Defense is symbolic to the president, and also real.  Success that cannot be argued with always seems to win his approval.  Think Vladimir.

 

 

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The McDonnell Douglas F/A-18 Super Hornet, serving both the Marines and on the Navy’s aircraft carriers.

 

 

 

Lockheed and the defense industry appear well positioned to win in Trump land.  Taxpayer watchdogs of every variety orally foam over the F-35 program, and their cry is copy-and-paste.  Here it is–

 

 

“The F-35 is the most expensive fighter aircraft in history.”

Reply:

Of course it is.  How many corner-turning products do you know that cost less?  What would make anyone think a revolutionary vertical takeoff/landing fighter would be any different?  Right–do more, cost less.

 

 

 

Think about it.  The government tells you they want you to build something that doesn’t exist.  It’s complicated.  But they say “We’ll pay.”  And “we want it to defy gravity–and radar invisibility would be cool.  When can you have that? Right now?”

 

That happened.  Everybody was there–Lockheed, Northrop Grumman, McDonnell Douglas, Boeing.  That was 1993, when the best and brightest thought we should simply build a single plane for everybody.  Guess what?  Now everybody’s unhappy.

 

 

Gone vertical.  Lockheed F-35.

“Base price?”  “Ah, let me check with the floor manager.”

 

 

Remember the F-2o Tigershark built by Northrop?  The F-22 remains the sole privately-developed fighter aircraft.  Cheap, fast, maneuverable, capable, simple, and no one bought it.  Pilots and ground crews loved it.  It was easy to keep air-borne.

 

 

Military procurements occur in a Byzantine manner.  It’s complicated.  It’s glacial.  It’s boring.  It’s called regulation.  Result?  Inefficiency bought through complication.  That’s bad.  Worse yet, we find congressional thumbs constantly on the scale.  Regardless of it’s reality, if a product is produced in a member’s state, they go all hard-sell.

 

 

This is precisely how the U.S. military ended up with the Bradley Fighting Vehicle.  The Bradley was loved by troops for it’s ability to allow weapons-fire in one side, then hold it while it bounced around.  With support like that who needs enemies?

 

So what’s Lockheed got that the government wants?  Lockheed Martin is the sole-go-to defense contractor for much of what the U.S. military needs, or congress decides to sell and buy.  For example we now see In the news “MEADS, Medium Extended Air Defense System.”  South Korea’s buying that system– currently on-hold for a year.

 

 

 

Lockheed now owns Sikorsky Helicopter.  They hope to turn it around, in a flat oil exploration and commercial market.  Hum.  Barring any huge shift in the defense industry, Lockheed will likely be the sole fighter aircraft manufacturer.  Lockheed’s  F-35 comes in several “variants.”  What does it do that buyers want most?  The STOVL Model is “short takeoff vertical landing.”  The Navy version or “CV” carrier version, does both verticals.

 

 

The F-35 is supposed to replace among others the F-16, and the legendary  A-10 “Wart Hog?”  No way.  Ask anyone who’s ever been there.  No way.

 

 

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The heavily- decorated A-10 “Tank Killer.” Anyone who’s been there loves the “Warthog.”  They know any way you slice it, it spells “DOOM.”

 

In a recent conference call Hewson was pretty directly asked about future F-35 margins.  Was the administration forcing Lockheed into a lower revenue trajectory?  “No,” was her answer in a only slightly condensed form.

 

 

 

Youtube link to advanced weapons;

 

 

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StockJaw

Images sourced from Pixabay.

https://pixabay.com/en/photos/

Additional resources:

http://www.investopedia.com/

https://www.schwab.com/public/schwab/client_home

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