Moog (MOG/A) - They make the thing that goes inside the rocket that either explodes or goes to space (sometimes both if you're Blue Origin)

Moog (MOG.A) is the sole source supplier of the electromechanical actuators inside every PAC-3 interceptor and thruster valves inside every THAAD missile. They are the only qualified supplier of these parts for nearly every US air defense missile. They are also a verified actuator supplier for SpaceX and supply payload integration equipment for Rocket Lab. I said the space guys' names, so you know Moog is legit. Outside defense and space, they have \~$1B of revenue (and growing) tied to industrial automation including robotics, oil & gas, and datacenters. There are few companies as well positioned in the A&D space as Moog and yet no analysts talk about it.

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Once again, this is not AI generated. Also, it is not financial advice.

Investment Thesis:

In case you haven't heard, 🥭 has been shooting air defense missiles at anything higher than 10 feet in the air over Iran and munitions stocks are rapidly depleting. The US government has signed framework agreements to produce 3x more PAC-3 and 4x more THAAD missiles per year, which are backed by a multi-billion dollar capex buildout by Lockheed, the prime on those programs. To reiterate, Moog is the sole source supplier for some of the most critical and technically complex components on nearly all air-defense missiles used by the US military.

Yes, there is a prevailing narrative that drone warfare will require lower cost anti-air solutions, but those are years away from action at scale and munitions agreements are already signed with billions of dollars of capacity going into the ground right now. Moog is also well positioned for the Golden Dome to sole source components. They have an entire section of their website dedicated just to Golden Dome and are clearly twerking for an award. Any announcement will make this thing go parabolic.

As stated above, they're also doing some nice things on the non-defense side of the business (but that's less relevant to the thesis imo).

Most importantly, management constantly sandbags its guidance and then beats by double digits every quarter. Seriously, 7 consecutive quarters of this shit and the market throws up every time they give guidance. There are very few analysts that cover Moog to start with and the ones that do are mouthbreathers that don't understand the ridiculous ramp they're going to see over the next few years. From first hand experience, the massive ramping demand for these programs is all any A&D electronics supplier can talk about these days.

Value Chain Position:

Moog is a picks-and-shovels play for the Iran conflict, with growing exposure to space and other high growth end markets. Moog's core capability is in engineering and manufacturing the things that change the direction of another thing (e.g., moves the engine nozzle on a rocket for steering, controls antenna positioning on a satellite, etc.). Flight-critical applications have an extremely high cost of failure and must account for microsecond response times, precise positioning, and extreme temperature ranges. If you know anything about the A&D supply chain you know the qualification processes for the types of components Moog supplies can take years, which is a large barrier to entry (if you even have the ability to engineer and manufacture it at high yields in the first place).

Moog supplies the OEM. It's operations cover engineering/design and system integration. Once designed and qualified, their products travels with every program through its 30-50 year life. It's sole source position on PAC-3/THAAD are locked in. A&D OEM's typically like 2-3 suppliers for a particular component, so it is unusual that Lockheed is affording Moog this type of concentration.

Addressable Market Expansion:

Moog is undergoing the most significant TAM expansion in its 75-year history, which is anchored by the ramp of PAC-3 and THAAD anti-air missile programs. Moog's 2026E revenue is \~$4B. There are billions of dollars of whitespace for Moog to grow into and it's already growing at >20%.

• Missile Defense Actuation (\~$2-3B -> \~$4-5B): PAC-3 3x ramp; THAAD 4x ramp; Golden Dome opportunity; European rearmament trend
• Military Aircraft Controls (\~$3-4B -> \~$4-5B): F-35 production; 20-year program start for FLRAA/MV-75; legacy fleet MRO supply for F-15, F-16, F/A-18
• Space Actuation & Propulsion (\~$2B -> $3B): Proliferation of LEO constellations (SpaceX); commercial launch (SpaceX, Rocket Lab); Space Force programs
• Commercial Aircraft Controls (\~$4-5B -> $5-6B): Airbus A320/A350 ramp; B737 MAX production; MRO on aging legacy fleet
• Industrial (incl. Datacenter) (\~$2-3B -> $3-4B): Fast growing AI datacenter liquid cooling pumps
• Total Addressable Market = \~$13-17B -> $19-23B (+35-45% growth)

Near-Term Catalysts:

• Iran Conflict \- Until recently, the market has been incorrectly penalizing Moog (oil shock, inflation fears), despite this being a dong-slap across the face sized demand signal. When I say the analysts are dumb, I conclude this to be true for their inability to connect Moog's PAC-3/THAAD dominance to the conflict. Only recently is it gaining any momentum as the market begins understanding the business it has become.
• Continued FCF Performance \- Moog has negative -$79m of FCF in YTD from the working capital build required to service rapidly ramping demand versus full year guidance of positive +$200m. This is the main factor holding share price down. Q2 came in at positive +$98m, meaning they need \~$280m of FCF in Q3 and Q4 to meet guidance. Q3 should continue to show strong FCF momentum and every consecutive quarter where cashflow improves will cause another leg up on share price.
• Earnings Outperformance \- Management consistently gives limpdick guidance which it then smashes a few months later. The market penalizes them after every earnings calls because apparently it would be too hard to just look at its seven consecutive quarters of double-digit EPS outperformance on Yahoo Finance.
• PAC-3/THAAD Ramp Narrative \- Everyone knows how fast we're depleting our stockpiles, but there is not yet deep supply chain analysis circulating to illustrate the depths of the situation and timing/magnitude the approaching restock will require. The ramp has barely begun and can be viewed as upside to the current base business.
• Sell-Side Analyst Coverage Initiation \- Only 3-4 sell-side analysts actively cover Moog (compared to competitors \~15 for Curtiss-Wright and \~20+ for TransDigm). Initiation of coverage from a prominent analyst with focus on defense side of the business will help the market wake up to the opportunity.
• Golden Dome Award \- Moog is heavily pursuing Golden Dome (\~$185B+ program). A formal award would be a parabolic catalyst that is not priced in currently.

Institutional Ownership & Sell-Side Coverage:

As covered above, Moog has limited sell-side coverage compared to other differentiated A&D components suppliers. Institutional ownership is mainly passive funds (that are growing their positions) and there is no real positions held by active investors to speak of. The market is still early in its discovery of Moog. The market also dislikes the dumbass dual class structure Moog has. If they ever recapitalize out of it, that would be another catalyst.

tl;dr

The US is lighting piles of money on fire shooting down Iranian drones with anti-air missiles. It will take years to scale next generation drone defense solutions. The US must restock it's traditional munitions and has already agreed to a massive 3-4x production ramp on those programs. Moog is the sole source supplier of components on substantially all anti-air munitions used by the US military (mainly PAC-3 and THAAD). They are underrepresented by the analyst community and its growth profile and profitability is not fully discovered by the market. Assuming they continue to beat guidance at their current cadence, EPS would be \~$15 (vs. consensus of \~$10). At \~45x multiple (comparable to peers and +13x to current), Moog's share price would be $675 (+70% to current). Golden Dome and non-defense segment growth provide even more upside.

Yes, it's run up over the last year. Sorry it's not down 50% like ADBE or some other SaaS shitco. Despite recent growth, the market still hasn't fully figured out Moog's ridiculous growth potential, which is what makes this is an opportunity with asymmetrical upside.

Positions: Small entry position of 4 common shares and will be allocating more after Q3 earnings when management sandbags guidance again and price dips

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