Trade alert: The April Pick is A Picks-and-Shovels Play on Aerospace and Defence
War, rearmament, and tight supply chains. I found a supplier sitting in the middle of all three.
Hello fellow Sharks,
As I teased in previous posts, the April Monthly Pick comes from aerospace and defence, click here to jump to the trade alert.
The sector has re-rated as the market woke up to war, rearmament, and strained supply chains. But that does not mean the easy money is gone. It means you have to dig deeper into the chain.
I didn’t want a company that only works if the Iran war escalates. The ceasefire is fragile, the situation is fluid, and I don’t build a thesis around outcomes I cannot control. I wanted a business strong enough to hold up even if the headlines calm down and sector valuations cool off.
That led me to the same approach I have used with AI and energy: picks and shovels. Rather than chase the obvious defence prime contractors, I looked one level deeper for a supplier that provides something critical, hard to replace, and easy to underestimate.
What I found is a company that sits at the center of three overlapping demand waves. It supplies specialized materials and components for some of the most demanding aerospace and defence applications in the world. Jet engines, airframes, military aircraft, missiles, and naval programs. The kind of end markets where failure is not tolerated and switching suppliers takes years, not quarters.
This is not a generic industrial name hoping to catch a cyclical bounce. Here is what stood out in my research:
The company holds deeply embedded supplier positions that are difficult to replace. Not because management says so on a slide deck, but because qualification cycles are brutal, technical requirements are extreme, and customers cannot afford mistakes. In several critical product categories, there is no qualified alternative supplier. That is pricing power in disguise.
Over the past several years, the business has reshaped its portfolio. It pushed further into higher-value end markets and materially improved margins. Revenue mix has shifted toward aerospace and defence, which now makes up the majority of sales. That shift matters because it changes the earnings floor. This is no longer a cyclical metals story dressed up for the moment. The transformation is structural.
Management has paired the operating improvement with meaningful shareholder returns: debt reduction and large buybacks funded by improving FCF.
The stock is not cheap. The market has noticed the story. But my deep dive shows the risk-reward still works, and I will walk through exactly why later this week when the full analysis goes out.
The deep dive covers the full thesis: moat analysis, Iran war demand implications, margin trajectory, valuation, the bear case, and my verdict on risk-reward. Paid subscribers get it all.
Funding the Position
To finance the new position, I made three moves.
Closing KINS. I have been transparent about this. KINS delivered the most profitable year in its history. But as i wrote in Weekly #72, the easy upside has been captured. The stock is up +35% from cost basis, the thesis has played out, and the risk-reward from here depends on catastrophe assumptions and growth in a tighter insurance market.
I flagged it as a trim candidate if I needed capital. Now I need capital for a higher-conviction idea.
Closing PPC. Full postmortem coming later this week.
Trimming POWL. Partial trim to fund the balance of the new position. POWL remains a conviction hold, and the thesis is intact.
