A value investor view on Elbit Systems 16-Dec-09 10:19 am - Industry growth might moderate but it is likely to stay high a geopolitical situation is far from stable.
- Company has a simple business model and a well diversified product portfolio.
- Company enjoys strong competitive advantages:
(1) Superior testing and product development thanks to its close interaction with the IDF.
(2) Access to high level enginieering talent pool in Israel
(3) Customer captivity (it's hard and risky to change combat systems once soldiers and officers get used to them)
(4) Some synergies accross product lines
- The company is conservatively financed with almost zero net debt.
- High net margins and ROE (7.2%; 27%)
- Attractively priced at 6.5x ebitda
- management seems competent (they performed some acquisitions that actually make sense at decent prices)
- Risk is moderate (main threat is a cutback in defense spending. Elbit products tend to be more resilient in general).
and my comment.....
I own some of this stock for all the reasons you mentioned and I believe in general that robotic warfare will grow exponentially and soon china will make them but who wants to buy weapons from a communist country.
Perhaps a reason ESLT hits resistance is because it is located in the middle of a hornets nest of its enemies. Israel has persevered but soon its enemies will have better missiles and weapons and if they could aim them I suspect that a arms company would be a target.
Of course I would imagine that the mfg facilities of Elbit might have defensive drones to stop incoming weapons.......
If elbit can just build that bubble over Israel.....
sci fi but real...
Disclosure: long ESLT