Defense

The post-Cold-War "peace dividend" is structurally over. Great-power competition with China, a re-armed Europe, persistent Middle East kinetic conflict, and the visible inadequacy of legacy primes against modern threat profiles have all combined to expand the defense procurement envelope for at least a decade. This is not a cyclical defense rally; it is a generational re-pricing of national-security spend.

Inside that envelope, the value is shifting away from cost-plus prime contractors toward software-defined, mission-specific, attritable hardware. Anduril-class companies, hyperscaler-style compute pulled into theatre, unmanned systems at every altitude, and hypersonic capability are absorbing budget share faster than the historic primes can defend it. Where the prime stack is still durable (large platforms with multi-decade contracts) we underwrite cash generation; where it is being challenged (mid-stack ISR, autonomous swarms, electronic warfare), we underwrite the disruptors.

The investable surface is still narrow on public markets. Many of the most consequential defense-tech companies remain private (Anduril, Shield AI, Hadrian, Saronic). This makes the public defense universe an asymmetric watchlist: small mid-cap primes adapting fast are mispriced down, large primes are mispriced for stability they no longer have, and the few public pure-plays in unmanned, hypersonics, and counter-drone are mispriced for the contract velocity that is actually accruing.

Edge sources we lean on: (1) congressional disclosure flow; defense-committee members frequently telegraph appropriations direction via personal trades; (2) primes-vs-newcomers contract-award analysis from DoD and FOIA-released programme data; (3) the 13F book of funds that historically nail defense cycles (e.g., long-duration value managers loading primes; growth funds rotating into Palantir, Kratos, AeroVironment).