Our Outlook for Lockheed Martin's End Markets Has Improved Due to Increased Geopolitical Threats

We think Lockheed Martin's exposure to the F-35 program, hypersonic missiles, and the militarization of space is well aligned with areas of secular growth in the defense budget. The defense budget is a political process, which is inherently difficult to predict. Therefore, we favor companies with tangible growth profiles through a steady stream of contract wins, ideally to contracts that are fulfilled over decades. Thankfully for defense investors, many programs are procured and maintained over decades. For instance, the F-35, which accounts for about 30% of Lockheed's revenue, will be maintained through 2070. Regulated margins, mature markets, customer-paid research and development, and long-term revenue visibility allow the defense primes to deliver a lot of cash to shareholders, which we view positively because we don’t see substantial growth in this industry.