To The Moon

There was an interesting piece of news yesterday: Trump announced approval for the U.S. Navy to build two brand-new warships, both to be named after him, and also revealed plans to increase the number of aircraft carriers.

Shipbuilding giant $Hillenbrand(HI)$   jumped more than 8% on the news. Back in February this YEAR, its financial performance was weak: profit margins had fallen to cyclical lows, and nearly all key metrics came in below expectations.

The main reasons were severe inflation in recent years and sharply rising wages.

More than half of HII’s contracts are fixed-price contracts. While some costs are reimbursable, there is a cap—once that limit is exceeded, any additional costs must be absorbed by the company.

During its earnings call, the company stated:

“Inflation has permeated every element of our cost structure, not just wages… These long-term contracts are being affected by inflation, the availability of experienced shipbuilding labor, and ongoing material constraints…”

However, our HII’s order backlog continued to grow, securing more than five years of future revenue.

Moreover, Trump is expected to push for a revival of U.S. defense manufacturing, with profitability likely rebounding after hitting bottom. As legacy contracts are gradually completed and replaced with newer ones, margins should naturally improve over time.

Since after earnings, HII has risen 115%. To be honest, given the pessimistic market sentiment back then, I didn’t catch the absolute bottom. I only started building a position when the stock reached its annual moving average—yet still achieved returns of over 50%.

This opportunity came from spotting the defense sector trend early. In the end, macro trends remain the most important factor.

@TigerObserver  @Daily_Discussion  @Tiger_comments  @TigerPM  @TigerStars