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What Stephen 'Sarge' Guilfoyle Sees in Lockheed Martin

Recent F-35 fighter agreement helps ensure stability in production process.

Lockheed Martin  (LMT) - Get Lockheed Martin Corporation (LMT) Report, the defense manufacturer, recently reached an agreement with the Pentagon's F-35 Joint Program Office on an F-35 production rebaseline.

While  the number falls short of what the company had projected, Real Money’s Stephen “Sarge” Guilfoyle argues it is still a positive. “This is great news and what we were hoping for, as it would ensure predictability and stability in the production process while also recovering aircraft shortfall realized over the past 18 months due to the pandemic,” Guilfoyle wrote recently on Real Money.

There are a couple of catches - the re-baseline is slightly smaller than what the manufacturer estimated and the fifth-generation fighter is “perhaps the world's most complex, most advanced, most expensive fighter aircraft program,” Guilfoyle wrote. With the rebaseline, the schedules for delivery are now 133 to 139 F-35s in 2021, 151 to 153 in 2022 and156 aircraft in 2023. One catch is that Lockheed Martin said it planned to deliver 169 aircraft in 2022.

Lockheed Martin still has to wait on financing and what the lawmakers in Washington, D.C. can agree to. Allocating money for defense spending in this current environment should not be difficult, Guilfoyle wrote.

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The stock price could also encounter some hurdles and Guilfoyle is concerned about the gap in between $340 and $347 that occurred recently.

Guilfoyle remains long on Lockheed Martin and his strategy is to increase his position eventually. “My plan is to watch for the development of a new pattern,” he wrote. “I expect this rally will produce a handle at some point that makes what you see now look like a cup. I would love to increase my position in that gap once the algos try to fill it.”

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