Paradise Capital
AI & Defense Investor, Ex-Special Operations/Private Military Contractor
BAE Systems' financial health could hardly be stronger, backing the long case. It is the sole source of the THAAD infrared seeker, the highest-margin content in the missile, housed in Electronic Systems, its richest segment at about 15% EBIT versus 11% for the group. As Lockheed Martin quadruples THAAD production, BAE has signed a matched framework to quadruple seekers, sending more volume through its best-margin line. x.com
BAE Systems gains high-margin, sole-source volume from the THAAD ramp because it owns the interceptor's infrared seeker, the most valuable part of the missile. Lockheed Martin won up to $35B to boost THAAD output, and BAE signed a matched framework to quadruple seekers. At 12-18% of a $13-15M interceptor and 400 a year, seeker revenue could reach $650M-$1B, with $90-165M of EBIT at about 15% margins. That is low single digits of revenue, not a rerating, and builds through 2030. x.com x.com x.com
BAE Systems is a straightforward buy because the new era of defense spending is geopolitical, not cyclical, as NATO and allies rearm for a decade and Europe can no longer count on US protection. Long-cycle contracts and a record £80bn-plus backlog give visible revenue, sales grow steadily at 8-10%, and dividends rise about 8% a year. Its cyber, electronic and next-gen air systems have proven vital, and government-backed demand protects margins. It is no longer cheap, but quality rarely is. x.com
The best valuation-adjusted European and Asian defense names are probably not the obvious winners such as Saab and Rheinmetall, where much of the easy multiple expansion already happened. In Europe, Leonardo ranks first, then BAE Systems. In Asia, Korea Aerospace Industries and Hanwha Aerospace lead, followed by LIG Nex1 and Hyundai Rotem. Per @eliant_capital, this year's geopolitical developments mean European and Asian defense companies are still likely headed a lot higher. x.com x.com
Lockheed Martin's strong earnings, raised guidance and a potential historic F-35 deal support its stock as the price presses toward a wedge breakout. Q3 EPS and sales exceeded estimates; the F-35 deal remains potential. x.com
Lockheed Martin is a defensive core holding with near-monopoly defense franchises and steady cash flow. The F-35, over 25% of revenue, is the only fifth-generation fighter deployed at scale in the West, and FY2026-27 budgets raise F-35 funding 62% and more than double PAC-3 and THAAD procurement. Backlog is $186.4B, 2.4x annual revenue, new Army and Navy contracts landed May 28, and over 60% of free cash flow goes to dividends and buybacks. x.com
Lockheed Martin is the straightforward defense buy, with a 3.2x book-to-bill. The stock fell last quarter because capex rose to meet very high demand, a dumb reaction. @kaizen_cap adds that money from awarded contracts flows over multiple years, so peak awards and revenue recognition may come in 2027-2028 even with a flat budget. x.com x.com
Lockheed Martin looks pretty cheap at about 16.5x 2027 earnings for a business with effectively infinite duration. x.com x.com
Lockheed Martin is cheap against its earnings, trading at 22x trailing and 18x next year's, versus the 24x aerospace and defense suppliers usually get. At 24x next year's $32.72 EPS, give or take 12%, fair value runs $690.97 to $879.42, so the stock sits 15% below where fair value starts. This is a valuation read on reported earnings and estimates only, not fundamental work. x.com
Lockheed Martin, now down for the year, is a buy for the long-term portfolio because defense is always needed. x.com
Lockheed Martin looks like a really great opportunity in defense, with orders outpacing deliveries at a reasonable valuation. Its backlog is a record $230B, almost 3x expected 2026 revenue, after $65B of new Q2 orders. Q2 sales grew 11% to $20.1B, and management raised free cash flow guidance to over $7B for 2026. It trades at about 18-19x 2026 earnings, reasonable for a sector leader; the next few weeks are about finding an entry point. x.com
Defense spending of $1-1.5 trillion and rising NATO budgets are the theme of the decade, making Palantir, Lockheed Martin, RTX, Northrop Grumman and L3Harris the top five defense stocks to own. Palantir is the purest defense-AI play: Q4 revenue jumped 70%, free cash flow reached $2.27B, and a $448M Navy shipbuilding modernization contract shows its government pipeline accelerating. At 232 times earnings, it is priced as the operating system for modern warfare, not a contractor. x.com
