Conviction / Primes and Integrators
NOC
Northrop Grumman Corporation
conviction · held at 5.3%
Northrop Grumman has a record 105 billion dollar order book and raised its profit forecast, helped by a restructured contract for the Sentinel missile program. It has still absorbed about 2 billion dollars of losses on early production of the B 21 bomber, its margin fell against a year ago, and its strength is in large manned platforms rather than the autonomous systems this fund is built around.
What we judge
The view on expected return from here, 0 to 100.
Whether the thesis could succeed without this company at all. This moves slowly, and only when the company's position genuinely changes.
What we measure
Facts from market data, not judgments.
| Price | $554.16 |
| 30-day move | +0.9% |
| Position in 52-week range | 25 |
| From the 52-week high | -28.4% |
| Average daily volume | $537.9M |
| Weight in the book | 5.3% |
| Since last rebalance | +6.3% |
Why it is in the fund
Thesis
B-21 Raider stealth bomber, Sentinel ICBM, and autonomous wingman programs position NOC at the center of next-gen autonomous strike.
Standing judgment
At $554.16 the stock is 28% off its high in the 25th percentile of its range, and some of that discount is deserved rather than an opportunity. This is now below the 55 hold bar and should be surfaced for a written review rather than defended by its backlog headline.
What changed, and why
Every move in this number carries the reason it moved. A score does not change without new evidence.
| Date | Conviction | Change | Cause | Evidence |
|---|---|---|---|---|
| 2026-08-05 | 50 | -5 | Cut below the hold bar because the FY2027 request moves the marginal defense dollar toward autonomous mass while Northrop's identity remains the exquisite low-rate platform, and the B-21 losses show what that identity costs. | Record $104.7B backlog on $20.0B of net awards and raised FY2026 guidance, but $7.6B of that backlog increase is the Sentinel EMD restructuring after a Nunn-McCurdy breach rather than new demand; approximately $2.0B of cumulative B-21 low-rate losses with a $1.0B loss accrual still carried in curren |
| 2026-08-05 | 55 | flat | first v3 judgment (v2 score was uninformative, see L-001): Backlog and guidance improved, but the fixed-price development margin problem the thesis predicts for legacy primes is visible on the B-21 and remains unresolved. | Q2 2026 sales $10.9B, +5%; Aeronautics +13% on B-21 volume; net awards $20B including $7.6B Sentinel; backlog $105B, +17% and a record; operating margin 10.1% vs 13.8% y/y; ~$2.0B cumulative B-21 LRIP losses with $1.0B loss accrual remaining in other current liabilities; FY26 EPS guidance raised $1. |
| 2026-08-05 | 55 | flat | first v3 judgment (v2 score was uninformative, see L-001): Backlog and guidance improved, but the fixed-price development margin problem the thesis predicts for legacy primes is visible on the B-21 and remains unresolved. | Q2 2026 sales $10.9B, +5%; Aeronautics +13% on B-21 volume; net awards $20B including $7.6B Sentinel; backlog $105B, +17% and a record; operating margin 10.1% vs 13.8% y/y; ~$2.0B cumulative B-21 LRIP losses with $1.0B loss accrual remaining in other current liabilities; FY26 EPS guidance raised $1. |
| 2026-08-05 | 55 | -39 | first v3 judgment (v2 score was uninformative, see L-001): Backlog and guidance improved, but the fixed-price development margin problem the thesis predicts for legacy primes is visible on the B-21 and remains unresolved. | Q2 2026 sales $10.9B, +5%; Aeronautics +13% on B-21 volume; net awards $20B including $7.6B Sentinel; backlog $105B, +17% and a record; operating margin 10.1% vs 13.8% y/y; ~$2.0B cumulative B-21 LRIP losses with $1.0B loss accrual remaining in other current liabilities; FY26 EPS guidance raised $1. |
| 2026-07-29 | 94 | +8 | migrated from v2 (cause not recorded) | v2 `scores` row |
| 2026-07-24 | 86 | -2 | migrated from v2 (cause not recorded) | v2 `scores` row |
| 2026-07-21 | 88 | -6 | migrated from v2 (cause not recorded) | v2 `scores` row |
| 2026-07-20 | 94 | +5 | migrated from v2 (cause not recorded) | v2 `scores` row |
| 2026-07-08 | 89 | +3 | migrated from v2 (cause not recorded) | v2 `scores` row |
| 2026-07-07 | 86 | -4 | migrated from v2 (cause not recorded) | v2 `scores` row |
| 2026-06-21 | 90 | -3 | migrated from v2 (cause not recorded) | v2 `scores` row |
| 2026-06-20 | 93 | flat | migrated from v2 (cause not recorded) | v2 `scores` row |
| 2026-06-19 | 93 | +4 | migrated from v2 (cause not recorded) | v2 `scores` row |
| 2026-06-19 | 89 | +1 | migrated from v2 (cause not recorded) | v2 `scores` row |
| 2026-06-12 | 88 | +2 | migrated from v2 (cause not recorded) | v2 `scores` row |
| 2026-06-12 | 86 | +8 | migrated from v2 (cause not recorded) | v2 `scores` row |