Lockheed Martin Corp

Lockheed Martin (LMT) was our second-largest detractor during the quarter, declining 15.7%. The sell-off was primarily driven by execution challenges within its Aeronautics division, which delayed aircraft deliveries and required additional rework on certain fixed-price contracts. We view these operational headwinds as temporary. Global demand for defence capabilities remains exceptionally strong as governments replenish depleted inventories and navigate an increasingly complex geopolitical backdrop. Anchored by leading positions across critical defence programs, Lockheed Martin remains well-positioned to drive long-term cash generation as execution normalizes and order backlogs convert into deliveries.

Lockheed Martin was a top contributor for the quarter, gaining 26% as the onset of the U.S.–Iran conflict in late February drove a significant re-rating of defense spending expectations. As U.S. military engagement escalated, investors rapidly repriced defense contractors higher on expectations of increased procurement activity, supplemental appropriations, and allied defense budget expansion. Lockheed’s position as the world’s largest defense contractor, with leading platforms in fighter aircraft (F-35), missile defense (PAC-3, THAAD), and rotary systems, made it a primary beneficiary of this sentiment shift. We continue to view Lockheed Martin as a high-quality franchise with durable earnings power, exceptional cash generation, and a long backlog providing multi-year revenue visibility.

Lockheed Martin (LMT) was a top performer in the first quarter, gaining +25%. The ongoing global conflicts and the fraying of the NATO alliance highlight the critical need for sustained investment in national defense. Lockheed Martin's involvement in the successful Artemis II mission, where it was responsible for the Orion crew module and complex flight software, underscores its strategic importance in the defense sector. This performance, coupled with the company's role in significant national projects, reinforces our belief in its strong competitive position and future growth potential.

Lockheed Martin, the defence contractor, was up 25.6%. Lockheed is understandably perceived to be a beneficiary of this war. That being said, it also released solid full year results. Management highlighted its USD 194b backlog, continued expectation of strong cash flow, and significantly upped its 2026 expectations. With revised numbers and assumptions feeding it, our valuation increased by 11.2%. It now trades at a 24% premium to that. But in our view, given its subjectiveness, this is not enough to warrant selling.

LOCKHEED MARTIN CORP was mentioned as a top contributor to the portfolio's relative performance, but no specific argument or directional stance was provided regarding its future prospects or valuation.

Lockheed Martin Corp was mentioned as a top contributor to relative performance, but no specific argument or directional stance was provided regarding its future prospects or valuation.

Lockheed Martin (LMT) is the largest U.S. defense contractor, supplying advanced military systems to the U.S. Government and allies worldwide. Prior to starting our position, LMT’s stock had underperformed its peer group of defense contractors by a wide margin in 2025 for several reasons. It lost out to Boeing for the next generation of fighter jets and announced an unexpected charge of $1.6 billion on its Aeronautics and Canadian helicopter programs. These charges are a black eye for the company, but we believe LMT’s strong defense programs will allow the shares to rebound when investors gain confidence that the charges are sufficient to address the cost overruns. The company gave investors some reassurance on that score when it recently reiterated its full-year earnings guidance.

Lockheed Martin remains a key holding in our portfolio, reflecting our confidence in its strong market position and operational efficiency. The company has demonstrated robust profitability with an operating margin of 22.4%, significantly higher than the industry average. Its return on equity stands at 28.5%, showcasing effective management and capital utilization. We believe Lockheed Martin's competitive advantages, including its established relationships with government clients and advanced technological capabilities, position it well to benefit from ongoing defense spending and modernization efforts.

Lockheed Martin (LMT) is the largest U.S. defense contractor, supplying advanced military systems to the U.S. Government and allies worldwide. Although LMT’s stock had underperformed its peer group of defense contractors in 2025 due to losing out to Boeing for the next generation of fighter jets and an unexpected charge of $1.6 billion, we believe LMT’s strong defense programs will allow the shares to rebound. The company reassured investors by reiterating its full-year earnings guidance and has a long history of dividend increases, yielding 3.1% at the time of our original purchase.