CALLLMT3 months ago5.6Kviews

Lockheed Martin: three plants come online against a book that runs past 2029

The capital is committed and the demand to fill it is contracted. That is an unusually low-risk expansion.

The driver is capacity utilisation against a contracted book. An expansion built against committed demand carries far less risk than one built against forecast demand, and the market prices both the same way. The expansion is disclosed with dates and costs, and the backlog it is being built against extends several years past the completion date. The position: long on Lockheed Martin, entry locked at publication and the exit dated rather than open-ended. The target is stated in the call block above and the horizon with it. Sized to the catalyst rather than to conviction, with the invalidation written into the kill-switch card instead of left implicit. The risk is that the new customer set proves as cyclical as the old one once its own budget pressure arrives.

Discussion · 8

Pauline VidalJUN 29

This changed my mind. Splitting volume from price is what makes this legible. Interested in what the kill switch looks like in practice.

Omri ShakedJUN 28

Strong piece, one objection. I had not appreciated how much of this is already in consensus. How much does this depend on the macro cooperating?

Yael BrennerJUN 27

This lines up with what I saw in the filings. The utilisation assumption is where I disagree. Is there a cleaner way to express this than the equity?

Marco BianchiJUN 27

I have been waiting for someone to make this argument. The depreciation schedule really is the whole disagreement. Where does this break if rates back up another 50bp?

Marco BianchiJUN 27

Thanks for showing the workings. The destocking signature is textbook and nobody is naming it. What is the level where you would walk away?

Pauline VidalJUN 27

I came in sceptical. Splitting volume from price is what makes this legible. What does the bear actually have to be right about?

Marco BianchiJUN 26

Not convinced, but well argued. The exclusivity window is the part the market keeps mispricing. Interested in what the kill switch looks like in practice.

Adam RosenAuthorJUN 28

Fair challenge. Invalidation is a close below the lock price on volume, and I should have written that into the card rather than leaving it implicit. (593)