The Forgotten Cartel Behind Every Missile
In April 2026, the Federal Trade Commission received a strange letter.
It came from Northrop Grumman.
A formal petition asking the FTC to drop a consent order — an antitrust firewall that the government itself had imposed on Northrop in 2018 when it acquired Orbital ATK, the largest U.S. maker of solid rocket motors.
The 2018 order was supposed to protect competition. Northrop had to keep its rocket motor business at arm’s length so that competitors like Lockheed Martin could still buy parts.
In 2026, Northrop’s argument to the FTC was, essentially: please remove the rules, because the country needs us to produce faster than the rules allow.
Lockheed Martin immediately filed an opposition.
I stared at this filing for a long time. Because it told me something that almost nobody on Wall Street is pricing into defense stocks right now.
The United States is in the middle of the largest missile production ramp since the Cold War. Production rates of Patriot, Javelin, Stinger, Tomahawk, SM-6 — every one of them is being multiplied by 2x, 3x, even 4x. And the entire ramp is bottlenecked at the same chemical chokepoint.
A chokepoint controlled by two companies.
A friend who spent twenty years inside Pentagon acquisition put it to me this way over coffee last month: “Pierre, you can scream about Patriot stockpiles all you want. You can pass any supplemental you want. You can sign any aid package you want. None of it matters. We physically cannot build the missiles fast enough because we cannot build the rocket motors fast enough.“
He paused. “And every analyst I see on CNBC is treating this like a Lockheed earnings story.”
That conversation sent me down a three-week rabbit hole. I cancelled a board meeting. I spent two evenings reading congressional bills and Pentagon “Munitions War Room” reports. I made my wife listen to a fifteen-minute monologue on rocket fuel chemistry that I am certain she did not enjoy.
And I came out the other side with a portfolio reallocation that I’ll explain at the end of this letter.
The Consensus Is Dead Wrong About Defense Stocks
If you talk to any generalist investor right now, you will hear some version of the same narrative. “Defense stocks already ran. Lockheed is at 21x earnings. Northrop is rich. RTX has gotten the easy gains from Ukraine. If Trump cuts a deal with Putin or Iran calms down, the whole sector deflates.”
This is the most expensive misunderstanding in markets right now.
Let me be direct: the market is treating American defense like a war trade. It is not.
It is a 30-year industrial base deficit trade. And the difference between those two framings is worth several hundred billion dollars of equity value over the next decade.
Here is the number that changed my mind. Read it slowly.
In the 1990s, the United States had six qualified suppliers of military solid rocket motors. By 2018, after a series of mergers and bankruptcies, it had two. Just two. Northrop Grumman (which acquired Orbital ATK in 2018) and Aerojet Rocketdyne (which was acquired by L3Harris in July 2023 for $4.7 billion).
That is the entire industrial base for the propulsion that powers every American guided missile.
Every Javelin you’ve seen in a YouTube clip from Ukraine. Every Patriot interceptor that flew over Israel last summer. Every Tomahawk launched at Iran. Every Stinger handed to a Ukrainian conscript. Every PAC-3 fired from a launcher in Poland. Every Sentinel ICBM that will replace America’s aging Minuteman nuclear deterrent.
Every single one of them needs a solid rocket motor. And every single rocket motor comes from one of two companies.
I have been investing through cycles for a long time. I have seen oligopolies before. I have never seen a duopoly sit on top of the entire weapons supply of the world’s largest military.
This is, quite literally, the most concentrated industrial chokepoint in American defense.
And the Pentagon now openly admits it is the binding constraint on everything.
The $1.5 Trillion Production Ramp
Let me walk you through the math that kept me up last Tuesday.
The Department of War (the new name for the Pentagon under the Trump administration) signed five “landmark framework agreements” with RTX in February 2026. The headline was simple: production rates of AMRAAM, Tomahawk, SM-3, and SM-6 must rise two to four times their current levels.
Annual SM-6 production alone is being boosted to over 500 units per year. The Tomahawk line is being doubled.
Then there is Patriot. Lockheed and the Pentagon signed a historic agreement in January 2026 — Lockheed’s own word, not mine — to triple PAC-3 MSE production from roughly 600 missiles per year to 2,000 per year by 2030. Lockheed delivered 620 PAC-3 MSEs in 2025, a record year, up 60% in 24 months. The contract value? $9.8 billion for 1,970 missiles across FY2024-2026 alone.
Then there is Javelin. Lockheed and Raytheon’s joint venture is ramping production from 2,400 per year today to 3,960 by late 2026 — a 65% increase. The DoD’s own goal beyond that is 4,000+ annually.
Then there is Stinger — a missile so old it had been out of production for two decades. Raytheon shut down the line in 2002. In 2022, the Pentagon placed a $624 million emergency order and Raytheon had to bring retired engineers out of retirement, pulling 1970s paper schematics off shelves to restart the line. Stinger production now targets 60 missiles per month, the line will run through 2029, NATO has ordered another 940 missiles for Germany, Italy and the Netherlands, and in August 2025 RTX signed an MOU with Diehl Defence to double overall Stinger capacity through European co-production.
Then there is 155mm artillery. After Ukraine burned through a year’s worth of U.S. shells in eight weeks of war in 2022, the Army set a goal of 100,000 rounds per month by October 2025. Today they are producing 40,000 per month and the 100,000 target has slipped to mid-2026.
Then there is Sentinel — the $140+ billion next-generation American ICBM program that will replace the entire Minuteman III nuclear deterrent fleet starting late this decade. Northrop completed a full-scale qualification static fire of the Sentinel stage-one solid rocket motor in March 2025.
Then there is the hypersonic program. Dark Eagle, Conventional Prompt Strike, HACM, ARRW. All solid-fueled. All in their production scale-up phase.
Pull this all together. Conservatively, you are looking at over $700 billion of additional missile and propulsion orders sitting in U.S. prime contractor backlogs today, with another $500-800 billion of demand visibility through the 2030s as European, Japanese, Korean, Polish, Australian, and Middle Eastern buyers compete for the same production slots.
And every single one of these missiles needs a solid rocket motor.
I want to be very precise about this. This is not a forecast. This is not a “what if peace fails” scenario. These are signed contracts. Definitized obligations. Money already authorized by Congress and committed by the Pentagon.
The U.S. prime contractor combined backlog today already stands at approximately $700-800 billion, the highest in modern history. Lockheed: $194 billion at year-end 2025. RTX: $251 billion. Northrop: at a record. General Dynamics, L3Harris, and Boeing Defense add hundreds of billions more.
These are not growth stocks. These are compounding machines with 4-7 year revenue visibility.
But here is the trick the market is missing.
None of this gets built without solid rocket motors.
The Chemistry Problem
I want to take you behind the curtain for a moment on something most defense analysts genuinely do not understand.
A solid rocket motor sounds simple. It is a metal tube. You pour in chemical propellant. You light it. It burns and produces thrust. Boom — you have a missile.
In reality, it is one of the most technically demanding pieces of manufacturing in the entire American industrial economy.
Propellant grain has to be poured under vacuum. It has to cure for weeks. It has to be tested to thousandths-of-a-percent tolerances on burn rate. The casings are wound from filament composite by machines that take years to qualify. The nozzles, throats, and igniters require specialty materials sourced from a handful of suppliers — many of them single-source. Ammonium perchlorate, the oxidizer in roughly 90% of American military SRMs, is made by exactly one company in North America: American Pacific Corporation in Utah.
You cannot build a new SRM facility in 18 months. You cannot just “throw money at it.” Every new production line takes 3-5 years to design, build, qualify with the DoD, and certify with the FAA and ATF for handling of energetic materials.
This is why the Pentagon’s $32.7 million investment in September 2025 to “accelerate solid rocket motor component production” was, in private conversations with defense industrial base people, treated as a triage measure — a finger in the dam. It is not enough. Nobody thinks it is enough.
The brutal reality is this. Even if every U.S. missile maker received unlimited capital tomorrow morning, they could not double SRM output before 2028 at the earliest, and could not triple it before 2030.
That is the math.
That is the math the market is not pricing.
What Changed In 2025 — And Why I’m Buying Now
The Trump administration came into office in January 2025 with two simultaneous defense priorities. They wanted to cut legacy programs the President saw as wasteful. And they wanted to accelerate munitions production and homeland missile defense.
These priorities sound contradictory. They are not. Trump’s defense team correctly identified that the U.S. military’s actual deterrent value is measured in deployable munitions, not Pentagon headcount.
The result was a dual policy: cut overhead, accelerate iron.
In June 2025, the NATO Hague Summit committed every Alliance member to 5% of GDP on defense and security spending by 2035 — 3.5% on core defense, 1.5% on related infrastructure and resilience. This is not a Trump tweet. This is a signed multilateral treaty obligation across 32 sovereign states.
Estonia is heading to 5% from 2026. Lithuania has pledged 5-6% by 2026. France is going to 3.5%. Italy is doubling defense spending to 3% over four years. Germany passed a constitutional amendment in 2025 lifting the debt brake on defense — €500 billion of additional spending unlocked through the 2030s. The European Union’s ReArm Europe plan has earmarked €800 billion in defense spending through 2029, including €150 billion in SAFE loans.
In 2025 alone, every NATO member met or exceeded the old 2% target — versus only three members in 2014. European defense spending rose 20% year-over-year, hitting $574 billion. Equipment-only spending hit €130 billion, up 42% in a single year.
Meanwhile, the U.S. is fighting an undeclared two-front war: backfilling stockpiles depleted by Ukraine, Israel, and the Iran air campaign of 2025, while simultaneously trying to deter China from Taiwan with the AUKUS submarine buildup and the Pacific Deterrence Initiative.
A senior defense industrial base executive told CBS News in 2025 that U.S. Tomahawks were being expended faster than the production line could refill them. Pentagon officials say it will take “one to four years” to rebuild Tomahawk, Patriot, and other long-range munition stockpiles after Iran.
And here is the part the market is still not pricing.
European allies are buying American weapons systems while they wait to build their own. Poland signed $16 billion in Korean defense contracts but is also buying U.S. HIMARS, Patriot, and Javelin. Germany is buying F-35s and Patriot. The Netherlands is buying Stinger.
Every single one of those purchases consumes solid rocket motors that the United States cannot currently produce in sufficient quantity.
The Cartel Strikes Back
Here is what L3Harris and Northrop Grumman are doing about it.
In April 2026, L3Harris announced a $1.27 billion investment in Orange County, Virginia, for a new Advanced Propulsion Facility. This is, by a wide margin, the largest SRM capital expansion announced in U.S. history.
In July 2025, L3Harris broke ground on a separate $400+ million Arkansas expansion at the Camden campus — adding 20 new buildings across 110 acres, with the goal of increasing large solid rocket motor manufacturing capacity six-fold. The Camden site currently produces over 115,000 motors per year, from palm-sized tactical units to truck-sized strategic boosters.
L3Harris is also spending hundreds of millions more in Culpeper, Virginia and Huntsville, Alabama on SRM capacity. The aggregate L3Harris SRM capex commitment now exceeds $2 billion — virtually all of it pre-sold under firm DoD contracts running through the early 2030s.
L3Harris’s CEO Chris Kubasik has stated publicly that the company is “the only growth lever” the DoD has on tactical missile propulsion in the near term.
Northrop Grumman, for its part, is investing aggressively at its Promontory, Utah facility and at its expanded Bacchus and Magna sites. The Sentinel ICBM program alone requires Northrop to manufacture some of the largest solid rocket motors built in the United States since the Space Shuttle era. Northrop’s April 2026 FTC petition — asking to dismantle the 2018 antitrust firewall — is, in effect, an acknowledgment that the company cannot meet Pentagon demand under current rules.
The Pentagon is also encouraging new entrants. In August 2025, Anduril Industries opened the first entirely new SRM facility built in the United States in fifty years — a $75 million plant in McHenry, Mississippi, scaling to 6,000 tactical motors per year by end-2026. The DoD has funded Anduril with an additional $43.7 million under the Defense Production Act, with more on the way.
But here is the critical detail. Anduril is years from being qualified on legacy programs. Every existing missile system — Javelin, Patriot, Tomahawk, SM-6 — was designed around L3Harris and Northrop motor specifications. You cannot just swap suppliers. Re-qualification takes 3-5 years per missile program.
So even with new entrants, the duopoly controls the entire near-term ramp.
This is why I keep using the word cartel. It is not a perfect description — but functionally, for the rest of this decade, the U.S. solid rocket motor supply curve is set by two companies that are now expanding aggressively, and getting paid by the DoD to do so.
The Margin Story
I want to show you something that took me three hours to model out and convinced me to triple my position size.
For decades, defense primes have been seen as low-margin industrials. Long contracts. Cost-plus. Fixed margins around 10-12%. The market has historically valued them like infrastructure stocks: stable cash flows, slow growth, dividends.
That picture is breaking.
When you go from a buyer’s market to a seller’s market on a critical industrial input, every economic textbook will tell you the same thing: the supplier captures pricing power. And in the defense industrial base, pricing power flows directly through to operating margin.
L3Harris has openly stated on earnings calls that customers are paying premium pricing to secure delivery slots on solid rocket motors. RTX’s framework agreements with the DoD include explicit price escalators tied to volume and timeline. Lockheed has pulled forward billions of cash through definitized contracts and advance payments.
The result is showing up in numbers nobody is talking about.
Defense Tech operating margins expanded over 230 basis points in 2025, according to Global X. Q3 2025 defense earnings grew 29% year-over-year — nearly double the 15% growth rate of the S&P 500. Analysts project another 120 bps of margin expansion in 2026.
This is not normal industrial behavior. This is a supply-constrained oligopoly capturing the margin spread of its lifetime.
And here is the thing. If you look at where the margin is being captured inside the defense supply chain, it is concentrated in two areas: solid rocket motor specialists, and specialized actuation/electronics suppliers that have a similar oligopoly structure on their inputs.
Which brings me to the third company nobody is talking about.
The Hidden Tier-1
Every guided missile needs more than a motor. It needs actuators — the precision electromechanical fins that steer the missile in flight. Without them, an SRM is just a pipe bomb.
The American actuator market is dominated by one specialist: Moog Inc. Moog supplies guidance and actuation systems for Patriot, THAAD, Tomahawk, Standard Missile, hypersonic glide vehicles, and every major U.S. tactical and strategic missile system.
In its fiscal 2025, Moog reported $3.86 billion in revenue (+7% YoY), with Space & Defense at $1.1 billion (+9%). The company guides Space & Defense to grow another 11% in 2026 to $1.2 billion. Moog just won a >$100 million Patriot PAC-3 actuator contract from Lockheed — one of the largest single defense contracts in the company’s history.
Moog trades at roughly 19x forward earnings.
If you believe — as I do — that PAC-3 production will hit Lockheed’s 2,000-per-year target by 2030, then Moog’s defense backlog is going to compound at double-digit rates for the rest of this decade.
The market is valuing Moog like a diversified industrial. It is, increasingly, a defense pure-play with hidden monopolistic positioning on one of the highest-growth product categories in the entire industrial economy.
Why The Window Is Still Open
I want to be honest with you. I am not early on this trade anymore.
Goldman Sachs published a 50-page deep-dive on the European defense supercycle in June 2025. Morgan Stanley added three European defense names to its conviction buy list in October. Capstone in DC has been publishing notes on what they are calling the “Trump Corollary to the Monroe Doctrine.”
The institutional money is starting to move.
But here is why I am still buying aggressively in May 2026 — and why I just doubled one of my positions last Tuesday.
The re-rating has not happened on the picks-and-shovels names. The market is still pricing L3Harris like a diversified defense industrial at 17-18x forward earnings, even though its Aerojet Rocketdyne business is in the middle of the most extraordinary capacity buildout in U.S. SRM history — and a six-fold capacity expansion at Camden alone that is already pre-sold.
The market is still pricing Northrop Grumman at ~21x forward — slightly above its 5-year average — even though Sentinel, B-21, and the GBSD SRM programs are about to consume the next decade of free cash flow and protect margins through the early 2030s.
The market is still pricing Moog like a generic mid-cap industrial at 19x — even though its missile actuator backlog is now triple what it was three years ago.
The mispricing isn’t gigantic. But it is large enough that a 24-month rerate to fair value implies 50-80% upside on the names I am holding, with multi-year downside protection from contractually-backed revenue.
And the kicker — the part that I keep coming back to in my own modeling — is that every catalyst from here is asymmetric to the upside.
If Ukraine peace talks succeed: stockpile replenishment accelerates because Pentagon shifts focus from sustainment to deterrence rebuild.
If Iran tensions escalate: missile draw-down continues, replenishment orders accelerate.
If Taiwan situation deteriorates: PDI is fully funded, $20 billion+ of additional munitions orders flow.
If Trump cuts overall DoD topline: munitions get prioritized over Pentagon overhead, which is precisely the rebalancing the Trump team has signaled.
There is no realistic scenario over the next 36 months where U.S. missile production rates slow. None.
The bottleneck is the bottleneck. And the cartel is the cartel.
Macro Notes Premium - The Forgotten Cartel Behind Every Missile
I’ve spent the last three weeks building a model around three specific companies and one Pacific defense play that I think captures asymmetric upside to this thesis. I’ve gone back through Pentagon Munitions War Room transcripts, FY25 and FY26 NDAA filings, every quarterly earnings call from the U.S. defense primes, and the FTC Northrop petition.
For premium subscribers, here is the complete breakdown:
✅ My three core positions — full models, entry prices, target prices, and sizing. The L3Harris analysis alone runs 12 pages, including my fair-value model for the Aerojet Rocketdyne segment as a separate sum-of-the-parts. My base case has Aerojet alone worth more than the market currently ascribes to the entire L3Harris equity.
✅ The Moog deep-dive that took me 9 hours to build. Why I think the missile actuator business will grow at 15%+ CAGR through 2030, why operating leverage in this segment is misunderstood, my entry level (current price), and my 24-month target. Allocation: 5.5% of portfolio.
✅ The hypersonics dark horse — a small-cap with a quiet contractual relationship to two of the three U.S. hypersonic programs. Currently trading at 12x EV/EBITDA. If even one of its programs hits Milestone C in 2027, the multiple re-rate alone is 60-80%.
✅ The “second-derivative” Korean play — a Korean Tier-1 with locked-in supply agreements for Poland’s $30 billion 2026-2030 procurement pipeline. Currently 11x earnings. My model has revenue tripling over five years.
✅ The two stocks I am explicitly NOT buying — including a famous American prime that I believe is structurally over-earning and will see margin compression through 2027 as Trump’s procurement reform forces fixed-price contracting on legacy programs.
✅ My complete sizing and risk framework — how I’m holding 14% of my liquid portfolio across this theme, why I’m using long-dated calls on two of the four names rather than common stock, and the three macro hedges I have on as protection.
✅ The procurement catalyst calendar — specific dates between June 2026 and March 2027 where Northrop’s FTC petition could be ruled on, where L3Harris will likely receive a major new Sentinel-related award, and where the Pentagon’s next Munitions War Room recommendations are due. These are the catalysts that move the names 8-15% in a single session.
Last Wednesday I added another $180,000 to my L3Harris position at $278. My 24-month target is $410.
If I’m right about the SRM monopoly story and the production ramp continues at the pace I expect — and at this point, every piece of evidence I find tells me I am — the next twelve months should see the largest re-rating of the defense industrial base since the Reagan buildup.
I do not say things like that lightly.
Below the paywall, I walk through exactly why.