Northrop Grumman (NOC), mcap=$71bn, price $457 vs $460

– A bet on the defense industry with NOC being one of the best-positioned players.
– The thesis is based on the expectation that China will invade Taiwan, which coupled with the current war in Ukraine will escalate the stand-off between China/Russia and the Western world.
– This will cause generational step change with multiyear increases in defense budgets.
– The defense industry is characterized by stable and predictable economics due to cost plus contract structures for primary contractors.
– NOC is best positioned within the two largest areas of spending – space and nuclear deterrence.

– ’23 EPS is expected to be +67% above consensus at $47.5/share.
– At an average historical PE multiple of 15x, the target is at $$713/share.

Exp. gain: +56% to $713/share in one year

Full $NOC write-up (free guest account required):

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