General Dynamics Corporation

“General Dynamics is among the highest-quality businesses in the defense sector — a nuclear submarine duopoly reinforced by AUKUS, a premium business jet franchise in structural upcycle, and a combat vehicle position entrenched in NATO rearmament — compounding EPS at 10-12% annually from a conservative balance sheet with ~90% FCF conversion and minimal risk of permanent capital impairment. At 19.3x forward earnings, the valuation is full and offers no margin of safety against execution risk at Electric Boat or a Gulfstream demand downcycle, but is reasonable for the structural quality on offer. Expected 10-year total returns of 8-10% annually are above-average for the risk level, making this a standard-sized BUY for long-term investors rather than a generational opportunity.”