Actionable insights — Trading Alert (Re-post): Lockheed Martin (LMT)
The repeatable analysis behind the alert: not that Haymaker likes Lockheed, but how to reuse the "bears think the war is over" mispricing template across asset classes, run an accumulate-weakness/trim-strength position over years, and pre-define the single macro line that kills the thesis — written so each step can be rerun on the next name.
How to read this page: each insight is a method — the pattern that surfaced the name, the steps that confirmed the thesis, and the discipline to apply when re-running it. The boxed line shows how it played out in this alert. (Written newsletter — "read" links open the source post; no timestamps.)
1. Reuse the "bears think the war is over" mispricing template across asset classes
The repeatable method
- Identify a group priced as though a disruptive condition (war, shortage, crisis) has permanently ended — the tell is a consensus shrug: "the shooting war is in the rear-view mirror, why hold it?"
- Test the premise against the facts on the ground: is the condition actually resolved, or "allegedly resolved"? If supply shocks, inventory drawdowns or hostilities persist, the consensus is early, not right.
- Confirm the mispricing quantitatively — the asset flat-lining for years despite confirming breakouts, at decade-low valuation multiples — then apply the same template that worked in the last asset class to the next one.
Here: the exact attitude that had oil "trading in the upper 60s… despite a massive supply shock" is now on defense: LMT flat-lined four years despite breakouts, at one of its lowest P/S & P/E of the decade (17× vs the S&P's 21×), while the Gulf "peace" stays unresolved and Patriot inventories run dry — the oil playbook re-run on a defense prime.
Watch for
- A "conflict over / crisis over" consensus colliding with persistent physical evidence (inventory shortages, ongoing hostilities, order backlogs); decade-low multiples on a still-uptrending name as the entry signature.
2. Compare valuation on earnings quality, not just the multiple
The repeatable method
- When citing a P/E discount to the index, check what's inside each "E": strip extraordinary items, one-off investment markups, and non-recurring gains before trusting the comparison.
- Flag circular earnings especially — gains booked on stakes in private companies that are also the reporter's customers inflate the index "E" and understate the true valuation gap.
- Prefer the name whose earnings are boring and operational: a 17× on clean earnings is cheaper than it looks against a 21× index propped by paper gains.
Here: LMT's 17× is "not inflated by extraordinary items," while S&P heavy hitters "like Google [are] recording massive non-recurring gains on investments in private companies (many of which are also their customers)" — so the true LMT-vs-index discount is wider than 17-vs-21.
Watch for
- Non-recurring investment gains (especially circular vendor-customer stakes) inside an index or peer "E" — widen the quality-adjusted gap before judging the discount.
3. Anchor a defense/industrial thesis to a program-level supply shortage
The repeatable method
- Go below the sector story to a specific program with demonstrated battlefield/field performance and a quantifiable inventory shortfall — that's where multi-year production revenue is actually locked in.
- Verify the shortage is structural: depleted stockpiles across multiple buyers (not one), high production complexity that blocks quick new entrants, and few scaled alternative suppliers (geopolitics can disqualify some, e.g. CCP-tied vendors).
- Add the adaptation check: is the company pivoting toward where warfare is going (drones, unmanned naval) via M&A or new programs, so the legacy-obsolescence knock doesn't compound?
Here: the Patriot MIM-104 — "exceptional performance" in both Ukraine and Iran, Ukraine's inventories nearly exhausted, a shortage "even in the U.S." — makes production "nearly certain to be strong for years"; and LMT just bought Ultra Maritime (naval drone/tech) with Ukrainian drone-maker deals plausible next, answering the "high-cost weaponry disappointed" bear knock.
Watch for
- Program-level inventory data (stockpile drawdowns, replenishment orders) rather than sector headlines; acquisitions that move the contractor toward next-gen (drone/unmanned) demand.
4. Pre-define the single macro line that kills the thesis
The repeatable method
- For any thesis funded by government spending (defense, infrastructure, entitlement-adjacent), name the fiscal-capacity indicator that would break it — usually a long-term Treasury-yield threshold.
- Set explicit numeric levels and require a decisive break (not an intraday tick) so the kill-switch is objective and not re-litigated in the moment.
- Interpret the break correctly: it signals the funding source (deficit spending) is being repriced, so exit or de-risk rather than average down — the driver itself is impaired.
Here: the "highly disruptive" risk to LMT is "a decisive break above 4.6% on the U.S. T-note and north of 5% on the 30-year T-bond" — the sign America can no longer live, and spend, beyond its means, defense included.
Watch for
- The 10-year holding under 4.6% and the 30-year under 5%; a decisive break of either flips this from a valuation opportunity to a funding problem.
Methods distilled from the paid Haymaker newsletter (text in transcript.txt) for personal study. Not investment advice. © Haymaker / David Hay for source material.