Key insights
- The author highlights Lockheed Martin, Thermo Fisher, and Freeport-McMoRan as "picks and shovels" plays with strong moats and growth potential. Lockheed benefits from defense spending, Thermo Fisher from pharma R&D, and Freeport-McMoRan from rising copper demand. All three exhibit solid free cash flow and reasonable valuations, suggesting potential for gains. Technical analysis supports bullish outlooks.
I’ve been looking at some real pick-and-shovel plays lately. These are the companies that supply the critical stuff the bigger sectors need without being the hype names everyone talks about. I picked Lockheed Martin, Thermo Fisher, and Freeport-McMoRan because they have solid moats and I see clear growth over the next three to six months. Lockheed Martin has a wide moat in defense programs like the F-35 and missile systems. Fundamentals are strong with long-term government contracts and high barriers to entry. Free cash flow has been consistent north of $6 billion annually and they keep returning capital through buybacks and dividends. Forward P/E sits around 21. Technically the chart has been forming higher lows and is holding the 200-day average with volume picking up on defense budget news. Thermo Fisher is the go-to for lab instruments, reagents, and contract manufacturing services. Their moat comes from the installed base and switching costs once a pharma or biotech customer is locked in. Fundamentals look good with steady R&D spending across the industry. Free cash flow is running strong around $8 billion and margins are holding above 30 percent. Forward P/E is about 24 which feels fair given the growth. The technical picture shows it bouncing off support and building a base for the next leg higher. Freeport-McMoRan is one of the biggest copper producers with low-cost assets and long mine lives. Copper demand is picking up from data centers, grid upgrades, and infrastructure. Fundamentals are excellent with all-in sustaining costs well below current prices. Free cash flow has been robust and they are using it for debt paydown and returns to shareholders. Forward P/E around 18 leaves room to run. Technically it has broken out of a consolidation and is sitting above key moving averages with buyers stepping in. These three are not flashy but they have real businesses, strong cash flow, and reasonable valuations. I think they can deliver solid gains over the next three to six months as the underlying demand trends play out. I own positions in all three.