Mercury Systems, Inc. (NASDAQ:MRCY) is a provider of complex electronic subsystems to major defense contractors. In March, Mercury made a significant acquisition of a defense unit that was part of Microsemi Corp. This unit added embedded protection capabilities that are like military hardware cybersecurity, as well as solid state storage capabilities for its systems (versus using hard disk drives). During the fourth quarter, shares performed well as Mercury continued to win contract awards. This was aided by the sentiment that a Republican administration will be more likely to increase defense spending. We agree with this theory, but believe that Mercury’s growth is likely to be driven as much, or more, by market share gains as more work is outsourced to it by major defense prime contractors.
From Baron Discovery Fund's fourth quarter 2016 commentary.
