Summary
- General Dynamics is part of an oligopoly providing a must-have aspect of the United States defense plan.
- It also trades at a value price.
- The company has a solid balance sheet, great cash flow, and remains a premier defense play.
- Selling puts against the stock provides income on top of any value it has if put to you, plus a dividend.
Thesis
Look! Up there in the sky! It’s a bird! It’s a Gulfstream jet!
It’s an... all-new G600 aircraft that travels a range of 6,500 nautical miles at a cruise speed of Mach 0.85 and a max operating speed of Mach 0.925! Welcome to the world of aerospace and defense!
There’s nothing like the machinery created by human ingenuity in this sector, as far as we are concerned. The sheer complexity of every element of these sectors, in terms of actually building stuff that works and has no margin of error for failure, is impossible to conceive for us mere mortals.
All of the things that go into making a plane fly, a missile soar, and spaceships launch are truly miracles of human ingenuity that remain unparalleled achievements in human history. Engineering, physics, mathematics, construction, metallurgy, logistics... it's impossible to name all the disciplines and expertise that create these strange objects that transport people and wage war.
Which is why this sector is effectively an oligopoly, although it has a few more players than most oligopolies. That also means there is an extraordinarily high barrier to entry.
It's also far too late for new players to enter the game in any large way. Only small firms with expertise in a niche can get in.
Defense and aerospace are an essential part of every developed nation. In America, national security eats up a huge part of the federal budget even in peacetime and even with dovish administrations. Simply put, America does not exist without these sectors.
We've learned that while it stinks not to be able to go to restaurants, we don't need them. But we will always need aerospace and defense.
General Dynamics Corporation (GD) is a 68-year-old company that specializes in security and defense. Remember a few paragraphs ago where we described, in general, the complexity of this business.
Read this description of everything GD does and be awed:
