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.
Posted by snowycashflow
5 Comments
Is this the 90th shovel post this week?
Wtf?
More picks & shovels plays:
– AMD: There’s an explosion in agentic use-cases which all require a huge number of CPUs; AMD makes the lowest cost/power CPUs that support the standard computer architecture and operating system. Also Nvidia’s CUDA moat is slowly eroding as AI-coding makes it easier for developers to add features to ROC-m and integrate it better with various deep learning libraries. Besides CUDA, Nvidia’s GPU advantage over AMD is slim.
– TSMC: The only company in the world capable of manufacturing bleeding-edge AI chips. For some reason they are not raising prices like crazy even though their customers like Nvidia are asking them to raise prices lol, it’s only a matter of time before their profits explode.
– GOOG/AMZN: See their latest cloud reports and the acceleration in growth, because they enable agile companies to quickly iterate on top of their infrastructure (and their custom silicon).
Pick stocks you think will be much more valuable in ten years.
SMH – the epitome of Picks & Shovels
Yes let’s all invest in these companies at the end of the run. We are in peak retail investor lose all their money territory.