15-05-2025
My Raytheon call is up 30% but there is still juice
Matein Khalid
I was neurologically programmed to disbelieve every communique issued by the Indian or Pakistani military in the wartime and thus missed the spectacular 50% rise in the shares of AVIC Chengdu Aircraft, a Shenzhen listed vendor of the $39 million J-10 fighter jet that downed three Indian $250 million Rafales, a MiG-29 and Sukhoi-30 while French, British and US intelligence told sources in Reuters, Bloomberg, CNN, the NYT and the Financial Times about these catastrophic losses the Indian media led by Awful Arnab and even once respectable Barkha + every major newspaper in Bharat denied this obvious fact, even though I could see Dassault Aviation shares falling on my screens. The woes of French defense contractors is nirvana for America's Missile King Raytheon (RTX), a puppy I table banged at 99, which is now at 130.
I can imagine Saudi Arabia, UAE and Qatar increasing their missile defense in context of a colossal $500 billion weapons shopping spree with Pentagon Defense Contractors. The Street expects Raytheon's EPS at $7 a share next year and I can easily envisage a 22X valuation multiple for the unique hightech company that gave the world the Patriot, AMRAAM missiles, precision guided bombs, killer drones and electronic warfare space/sensor hardware. This means, RTX can well rise to 154 in the next 12-months. The risk-reward calculus and the macro zeitgeist in the Trumpian States of America (TSA) is just too yummy. With a trade deal with China in Geneva, a ceasefire in the subcontinent, with Modi and Munir's head under each arm, a tough love deal with Putin on Ukraine, the Ayatollahs in Iran and Maduro in Venezuela, DonnyT is the new Emperor of the World, not just the West. 'Peace through strength' is the new motto for Uncle Sam in Trump 2.0. The Big Guy has updated Teddy Roosevelt's fave pledge – speak loudly, carry a big stick and use it to whack foreign derrieres at every opportunity. This is the new Pax Americana and it will mean a valuation rerating for RTX.
See also I am a nervous bull on sterling since 1.22. Why?
RTX has exposure to NATO, Japan, South Korea, ASEAN and the GCC's most sensitive air warfare needs. Missile defense, air-to-air combat, space warfare, command center communications and stealth/blitzkrieg technologies. My Aunt married a Pakistan Airforce ace Uncle Micky of the 1971 war who once put the 5-year old Matt in the cockpit of his F-104 Starfighter and put his helmet on me. I never became a fighter pilot but I did see the movie Top Gun and know RTX's value template to make money inside out from the danger zone! Hopefully we all make more money from this idea.
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