This article was first published on July 5, 2019 on Seeking Alpha.
One market sector that provides companies with wide moats is the defense industry. The companies in this sector often have scale due to the costly nature of designing and manufacturing platforms and products. Second, the companies must maintain a workforce that has unique capabilities and security clearances that is difficult to replicate. Furthermore, the companies often have advantages in that major defense platforms have decades long life cycles leading to services and modernization contracts over time. From this perspective, some defense companies have first mover and historical knowledge advantages creating a high barrier for competitors.
In this article I discuss Huntington Ingalls Industries, Inc. (HII), a defense company focused on large naval ships and submarines. The company is not as well-known as other large defense contractors such as Lockheed Martin (LMT), Northrop Grumman (NOC), General Dynamics (GD) and Raytheon (RTN). But Huntington Ingalls has significant capabilities and expertise in naval ship building that few other companies can match.