Is Northrop Grumman (NOC) A Smart Long-Term Buy?

Artisan Partners Limited Partnership, a high value-added investment management firm, published its ‘Artisan Value Fund’ fourth quarter 2020 investor letter – a copy of which can be downloaded here. A return of 20% was recorded by its Investor Class: ARTLX, 20.05% by its Advisor Class: APDLX, and 20.07% by its Institutional Class: APHLX, in the fourth quarter of 2020, all outperformed its Russell 1000 Value Benchmark that delivered a 16.25% return and its Russel 1000 Index that was up by 13.69% in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Artisan Value Fund, in their Q4 2020 investor letter, mentioned Northrop Grumman Corporation (NYSE: NOC) and emphasized their views on the company. Northrop Grumman Corporation is a Falls Church, Virginia-based aerospace and defense company that currently has a $51.8 billion market capitalization. Since the beginning of the year, NOC delivered a 1.89% return, extending its 12-month gains to 9.25%. As of March 18, 2021, the stock closed at $314.94 per share.

Here is what Artisan Value Fund has to say about Northrop Grumman Corporation in their Q4 2020 investor letter:

“New purchases include Northrop Grumman. Northrop Grumman is a leader in manned aircraft, unmanned aircraft, spacecraft and missile-defense systems. We initiated a position in November 2020, as we believe the name is trading at an undeserved discount, despite having the potential to accelerate revenue over the next 24 months. In 2020, Northrup signed a contract to work with the US Air Force on their Ground Based Strategic Deterrent (GBSD) and B21 bomber. We believe the company’s portfolio is well-positioned with a highly desirable space segment business, significant classified content and GBSD driving growth. While the market has been focused on a “blue wave” risk to the defense budget, the industry is typically driven by threat assessment rather than budget constraints. If budget cuts were ever to affect the US Army, that customer represents less than 10% of the company’s revenue. This reinforces our belief that Northrop is well-positioned for the future and trades at an attractive valuation.”

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Our calculations show that Northrop Grumman Corporation (NYSE: NOC) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Northrop Grumman Corporation was in 20 hedge fund portfolios, compared to 29 funds in the third quarter. NOC delivered a 2.36% return in the past 3 months.