Defense contractors

[Spekulatius]

32 minutes ago, Hektor said:

Thanks @Spekulatius. I doubt commercial ship building will return to the US. But, I feel the military needs would remain with US firms. I am not sure what opportunities exists based on the situation mentioned in the WSJ article.

 My point is, you can’t have one (military shipbuilding ) without the other  (commercial), it is not very economical .  We tried and that’s why we are in the current situation. If you shield an industry from competition , you get exactly what we have - a bunch of shipyards that build a ship every 4 years or so and which costs a fortune.
Italy‘s Fincantieri for example builds ferries, cruise ships as well as naval vessels. They allegedly have some very good ships that ever the Navy is interested in, but undoubtedly they will probably not get an order for political reasons, even in a JV structure.

https://www.fincantieri.com/en/products-and-services/naval-vessels/

[Hektor]

Thanks for the reference to Fincantieri and the link, @Spekulatius. I agree the economics are better if a shipyard can serve defense and commercial. My current understanding is there are shipyards run by the Navy (I am not sure about this), and then there are the private ones like HII. I guess more business will shift from the Navy owned (if there is such a thing) yards to the private ones.

[Hektor]

Lutnick Suggests US Looking at Defense Industry After Intel Deal

 

https://www.bloomberg.com/news/articles/2025-08-26/lutnick-suggests-us-looking-at-defense-industry-after-intel-deal

 

US Commerce Secretary Howard Lutnick suggested the government is looking at the defense sector and other industries for potential stakes in companies after an unorthodox deal that saw the US obtain a 10% share in chipmaker Intel Corp.

 

Lutnick singled out Lockheed Martin Corp., claiming the company makes much of its revenue because of the US government. The US government accounted for about 73% of the company’s net sales last year, according to a securities filing.

[Spekulatius]

9 hours ago, Hektor said:

Lutnick Suggests US Looking at Defense Industry After Intel Deal

 

https://www.bloomberg.com/news/articles/2025-08-26/lutnick-suggests-us-looking-at-defense-industry-after-intel-deal

 

US Commerce Secretary Howard Lutnick suggested the government is looking at the defense sector and other industries for potential stakes in companies after an unorthodox deal that saw the US obtain a 10% share in chipmaker Intel Corp.

 

Lutnick singled out Lockheed Martin Corp., claiming the company makes much of its revenue because of the US government. The US government accounted for about 73% of the company’s net sales last year, according to a securities filing.

This was easy to foresee. Look at any company that can’t say no and the government can get an equity piece.  Invest or should I say divest accordingly.

 

[Spekulatius]

Painful read. Ouch!

https://www.cnn.com/2025/08/27/us/alaska-f-35-crash-accident-report-hnk-ml

[Hektor]

10 hours ago, Spekulatius said:

Painful read. Ouch!

https://www.cnn.com/2025/08/27/us/alaska-f-35-crash-accident-report-hnk-ml

 

Recently, a F35 was stranded in India for over a month

https://apnews.com/article/f35-british-fighter-jet-india-kerala-stranded-7aa8723b5a75bd94a5e4a3a588524af7

 

And in Japan this month

https://www.twz.com/air/uk-f-35b-still-stranded-in-japan-is-awaiting-spare-parts-to-return-to-hms-prince-of-wales

 

Edited August 28, 2025 by Hektor

[Spekulatius]

The F-35 is a great airplane when it flies but it often doesn’t. It’s operational readiness is low compared to other combat airplanes.

[Hektor]

https://www.bloomberg.com/news/features/2025-10-14/china-us-submarine-race-beijing-s-drone-sub-vs-us-navy-delays

 

The US Is Racing to Rebuild Its Submarine Power Before China Catches Up

Inside the effort to deliver a ‘transformational improvement’ in how the US builds submarines, vital to preserving its undersea advantage.

 

The submarine industrial base aims to recruit at least 100,000 skilled workers like Kaisen over the next decade to meet growing demand for vessels often viewed as the Navy’s ace in the hole in the Indo-Pacific region, China’s backyard.

 

With multiple boats approaching the end of their service lives and competitors like China rapidly building up their fleet, there are worries that the US won’t be able to quickly put enough new submarines in the water to preserve its long-standing undersea advantage.

 

Secretary of the Navy John Phelan warned lawmakers in May that delays have put the service “in a precarious position.”

 

At the center of the Navy’s concerns are two next-generation programs: the Columbia-class ballistic missile submarines and Virginia-class nuclear-powered attack boats.

 

“We need a transformational improvement and the ability to deliver twice the capacity we’re currently delivering,” Admiral Daryl Caudle, who was recently confirmed as Chief of Naval Operations, told the Senate Committee on Armed Services in July.

 

A shortage of skilled workers is a major factor behind the delays. A February 2025 GAO report described “particularly acute” workforce issues, including problems with recruitment, retention, and skills. Shipyards are struggling to keep workers, with some losing about 20% of their manufacturing labor force and 30% of those involved in critical trades, according to the Congressional Budget Office.

 

Annual hiring in the submarine industrial base increased by 200% between 2021 and 2024, according to the Navy, putting it on track to hire more than 14,000 new workers annually. The submarine industrial base aims to attract 140,000 workers over the next decade.

 

General Dynamics Electric Boat in Groton, Connecticut, a subsidiary of General Dynamics Corp., is the prime contractor for the Columbia class, with Huntington Ingalls Industries Inc. Newport News Shipbuilding its major subcontractor. They are co-builders of the Virginia class, sharing design and construction responsibilities. General Dynamics and Huntington Ingalls referred questions to the US Navy.

 

[Spekulatius]

Entry level jobs for welder etc at Electric Boat company in CT pay around $25/h. Perhaps they should consider paying more.

 

People make more money in service industries with much easier jobs.

Edited October 15, 2025 by Spekulatius

[Hektor]

On 10/15/2025 at 2:04 PM, Spekulatius said:

Entry level jobs for welder etc at Electric Boat company in CT pay around $25/h. Perhaps they should consider paying more.

 

People make more money in service industries with much easier jobs.

The article also alludes to this problem. A recruitment website (www.buildsubmarines.com) run by BlueForge Alliance, a non-profit in support of the submarine builders, seems to be an attempt to attract jobseekers from the easier gigs.

[Dalal.Holdings]

The place to invest in defense stocks is clearly not in the U.S. today…

 

I’m hoping some of my German SMEs figure out how to transition from being auto to defense suppliers

 

Edited October 27, 2025 by Dalal.Holdings

[Dalal.Holdings]

TKMS debut went swimmingly

 

KNDS will likely try to IPO soon

[Spekulatius]

Canada may buy the SAAB Gripen instead of the  F-35. The Gripen is not stealthy but its may fit Canada well as there are quite a few similarities between Canada and Sweden.

https://www.aerotime.aero/articles/canada-delays-f-35-decision-as-ottawa-weighs-gripen-option-and-industrial-return

[Dalal.Holdings]

I think Kongsberg Gruppen in Norway looks interesting. I've bought some shares on the sell off this week

 

They announced that they will be spinning off their maritime (non-defense) business in Q2 of the upcoming year

 

 

Edited November 1, 2025 by Dalal.Holdings

[anshulp]

oh thats fascinating - thanks for sharing. I haven't looked at the company in a long time. I like a lot of these euro names for the next few years. Even with the run up its hard to see them not continue to do well. Global_Defense_Sector_Landscape_-_Update.pdf

 

I don't remember how I got this deck in the summer but its a must ready for anyone interested in the sector in the EU and US. 

[Xerxes]

On 10/28/2025 at 10:02 PM, Spekulatius said:

Canada may buy the SAAB Gripen instead of the  F-35. The Gripen is not stealthy but its may fit Canada well as there are quite a few similarities between Canada and Sweden.

https://www.aerotime.aero/articles/canada-delays-f-35-decision-as-ottawa-weighs-gripen-option-and-industrial-return

Canada will very likely buy that tranche of F-35 that is contractually obligated to buy but not the full tranche. Really it is all up entangled with the trade discussion, including the Boeing E-8 aircraft as well. 

https://www.canada.ca/en/department-national-defence/news/2023/11/canada-purchasing-up-to-16-p-8a-poseidon-multi-mission-aircraft-for-the-royal-canadian-air-force.html

 

That said I do believe that Canada will have a two type aircraft fleet. 
 

 

 

Edited November 2, 2025 by Xerxes

[Dalal.Holdings]

https://www.politico.eu/article/germany-france-europe-fighter-jet-defense-aviation/

 

https://www.reuters.com/business/aerospace-defense/germany-sticks-year-end-deadline-fcas-fighter-decision-2025-11-07/

 

France wants ownership of the Franco-German plane program. No one point out which of the two country's finances are a total mess...

 

Bickering among nations is just common in Europe. Especially France and Germany. And now Germany considering bringing in UK (non-EU country, lol)...

 

France is not a great partner to be with on any long term project like this where there are bound to be cost overruns, delays, labor issues, etc.

 

Germany should just go it alone with smaller partners (Spain, UK/Sweden). They have the fiscal space to do it and can probably create a great end product

[Marco Van Basten]

1 hour ago, Dalal.Holdings said:

https://www.politico.eu/article/germany-france-europe-fighter-jet-defense-aviation/

 

https://www.reuters.com/business/aerospace-defense/germany-sticks-year-end-deadline-fcas-fighter-decision-2025-11-07/

 

France wants ownership of the Franco-German plane program. No one point out which of the two country's finances are a total mess...

 

Bickering among nations is just common in Europe. Especially France and Germany. And now Germany considering bringing in UK (non-EU country, lol)...

 

France is not a great partner to be with on any long term project like this where there are bound to be cost overruns, delays, labor issues, etc.

 

Germany should just go it alone with smaller partners (Spain, UK/Sweden). They have the fiscal space to do it and can probably create a great end product

France has the technology, Germany does not.  Now teaming up with Sweden - SAAB makes sense.  Spain has nothing to offer.  Not sure about the UK.  

[Dalal.Holdings]

24 minutes ago, Marco Van Basten said:

France has the technology, Germany does not.  Now teaming up with Sweden - SAAB makes sense.  Spain has nothing to offer.  Not sure about the UK.  

Spain’s Indra has experience in radar systems and is likely to be involved (and this is a good way to induce Spain to meet NATO defense spend targets). France is the question mark. The talk is UK’s BAE and/or Sweden’s Saab might replace France’s Dassault. Of course, partnering with UK would be awkward because a lot of Europeans feel the UK should be punished for Brexit and should not be able to tap some of the new EU defense funds…

 

There’s always so much pent up resentment and drama among European countries that it’s no wonder why they have a hard time getting anything done together. 

I actually think if the Germans put enough time and effort into this, they could pull it off successfully alone (with Spain as a minor partner maybe)…they have a history of developing highly capable weapons…

 

Edited November 10, 2025 by Dalal.Holdings

[Spekulatius]

Airbus itself is a pan European company. I guess the French see Rafael as their national champion and want to push for an outsized role.

Brining the Uk in is not without precedence as they were involved in prior European fighter projects and in a way this is an European NATO project more so than an EU project.

[Marco Van Basten]

1 hour ago, Spekulatius said:

Airbus itself is a pan European company. I guess the French see Rafael as their national champion and want to push for an outsized role.

Brining the Uk in is not without precedence as they were involved in prior European fighter projects and in a way this is an European NATO project more so than an EU project.

Look, Dassault can build the airplane, and Safran will supply the engine.  The problem is that the French don't have the money.  The Germans have the money, but have not built a military plane since World War II?  The French are trying to re-cut the deal, and the Germans who have to pay for the project are understandably not happy.  Interestingly, the Gripen uses a GE engine.  

Edited November 11, 2025 by Marco Van Basten

[Dalal.Holdings]

These guys could just buy more F-35s and wait to buy whatever 6th gen fighter the U.S. builds. Instead they insist on building their own.

 

France needs a fighter that works with its next aircraft carrier, but do they even have enough money for a carrier ? I thought their priorities were for pensioners…

 

Germany has the fiscal space to build a fighter program. They can build up a whole slew of suppliers out of their damaged auto industry. Maybe MTU can build the engines. This is the type of engineering Germans excel at…

 

I think working with France is not worth the headaches…

 

Edited November 11, 2025 by Dalal.Holdings

[Spekulatius]

Europe is better of producing their owner fighter plane. they have build the Tornado, Eurofighter Typhoon. Europe would be stupid to become more depend on US weapons, for which support and spare parts may not be available one day.

[Hektor]

https://www.wsj.com/world/asia/the-u-s-s-most-ambitious-shipyard-project-just-got-tougher-2438cb49

 

The U.S.’s Most Ambitious Shipyard Project Just Got Tougher

Hanwha Philly Shipyard, acquired by a South Korean firm and tasked with reviving U.S. shipbuilding, must now make a nuclear-powered submarine for the first time

[Saluki]

I've never found big defense contractors to have attractive valuations because they are obvious. I've had good luck with people supplying bigger contractors, like TAYD (double), Optex (+50%), and Kraken (multibagger). I only currently own the last one. 

 

I'm down about 30% on ISSC, but I think it's undervalued and it was beaten down because of lower margin from taking over a Honeywell subsidiary that supplies the military, but management had told people all along that would happen, so the market it weird. There's a nanocap, BOSC, that I had a small position in that looked interesting too. But I've been trimming non-core positions lately and positioning myself for turbulence. 

 

I think Anduril is interesting but overhyped. I did see talk about people buying it before it's public if the SEC permits tokenization and people like Robinhood get in on it for their customers. But that's a weird outcome since the IPO rules are there to protect retail customers, they shouldn't be optional.