Opinions
C. Kim Goodwin
General Dynamics Corp.
GD-N
TOP PICK
Oct 01, 2004
Interested in large cap companies that are more value oriented. Benefiting from a stable Dept. of Defence budget. Recent contract wins. Less used business jets available will help their Gulf Stream operations.
$102.750
Stock price when the opinion was issued
transportation equip & components
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BUY
It trades in line with peers at a reasonable 15x PE. Their cyber-defence division makes up a serious slice of its revenues. He likes this. The defence budget under Biden is still growing but not as quickly as before. That said, the defence industry will always see growth, but it's a matter of how fast or slow. Looking ahead, defence in general will focus on cyberattacks.
transportation equip & components
TOP PICK
4 areas: tech, marine systems, aerospace, combat systems. Marine systems segment provided main growth right now. Most of their contracts are cost+, which gives them built-in inflation protection if costs go up. Demand by wealthy for private air travel. US won't cut military spending anytime soon. Yield is 2.21%, has grown at 10% a year for the last 5 years and likely to continue. (Analysts’ price target is $234.24)
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COMMENT
Raytheon vs. General Dynamics When analyzing a company, look at its peers as well. In this case, Raytheon offers a buffer to only the defence business--commercial aerospace. Two-thirds of revenues come from commercial, the rest in defence. The former is a great opportunity because more planes will be produced as the economy improves. Meanwhile, defence offers stability. Prefers Raytheon.
transportation equip & components
HOLD
Really strong move after its pullback. He'd look to see where the 200-day MA is ($272). Looks a bit parabolic, that should make you nervous. Momentum indicators might show it a little overbought, a pullback would not surprise him.
Might be at the start of a consolidation, so might pause for a bit. Overall, you can't argue with the chart, so it's not over till it's over.
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