The Defense Half of the Flight Royalty Basket
Dylan Jovine’s “The Flight Royalty Three” is not a pure commercial-aviation story. Two of the three paid names lean on Pentagon spending as much as they do on airlines, and the third is a defense pure play. The argument is that defense budgets are expanding at the same time commercial fleets are aging, so the same companies that make certified aircraft parts get a second demand channel from military programs.
That dual exposure is the point. A supplier that makes parts for both a commercial airliner and a military transport is collecting on two fleets at once, which smooths the revenue and deepens the aftermarket moat. Here is what each of the three defense names actually does.
Howmet: Engine Parts for Both Fleets
Howmet Aerospace (NYSE: HWM) forges superalloy parts for the hottest section of jet engines and makes specialty airframe fasteners. The same hot-section technology that keeps a commercial turbofan flying also powers the engines on fighter jets, transports, and helicopters. When a military engine needs replacement airfoils or disks, Howmet’s certifications are already baked into the design.
The financial profile is a growth stock. Howmet carries about a $115 billion market cap against roughly $3 billion in debt, with analysts expecting earnings growth above 20% a year. The stock trades near 50 times forward earnings and recently sat around $289.18 per share. Jovine’s open portfolio shows it up 109% since August 2024, a mark tied to his own entry point.
HEICO: The Cost Saver the Pentagon Loves
HEICO (NYSE: HEI) takes a different route to the same customer. Its Parts Manufacturer Approval business builds FAA-certified copies of other makers’ parts and sells them for less. For a military customer running old airframes, a PMA part is a way to cut sustainment costs without sacrificing certification. About 65% of HEICO’s revenue is defense, with the remaining 35% commercial.
HEICO is family run and lightly levered, with roughly $2 billion in debt against a $52 billion market cap. It grows in the low-to-mid teens and trades above 50 times forward earnings at around $374.67 per share. Jovine has held it since July 2021 and shows it up 79%. Our HEICO stock profile breaks down the PMA model in detail.
Mercury Systems: The Classified Brains
Mercury Systems (NASDAQ: MRCY) is the one name on this list that is a defense pure play. It builds the electronics, the “classified brains,” that sit inside advanced military aircraft, handling the processing behind sensors, radar, and electronic warfare. The company is also the least certain of the three, and Jovine’s presentation treats it as a best-match guess rather than a confirmed reveal.
The story is a turnaround. Activist investors including Starboard and Jana pushed out the prior CEO, and new management drawn from Raytheon cut roughly half of the top leadership roles. Orders jumped 74% in the most recent quarter, and the company is built around a standardized computing layer called the Common Processing Architecture. The catch is valuation: about 80 times forward earnings on a $6.7 billion market cap, with the stock near $111.12 per share and up 33% in Jovine’s portfolio.
Reading the Defense Side Honestly
The defense tailwind is real, and it is well covered elsewhere. Our defense stocks explainer walks through how military budgets become contracts for names like these. The thing to weigh is that all three names are priced for growth that has not all arrived yet. Howmet, HEICO, and Mercury Systems all trade at premium multiples, so a new reader is paying for the thesis at today’s prices, not the prices Jovine paid when he opened the positions. For the full four-name picture including the free TransDigm reveal, see our aerospace and defense stocks explainer.
The defense channel adds a layer the commercial side does not have. Military aircraft fly far fewer hours than commercial jets, but they are held in service for decades, and their electronics age faster than their airframes. That is why Mercury Systems keeps coming up in this context. A fighter jet’s sensors and processors get upgraded many times over a thirty-year service life, and each upgrade is a contract for the companies that own the certified hardware. The same logic applies to Howmet’s engine parts and HEICO’s PMA components. The result is that defense revenue is not a one-time spike tied to a budget cycle. It is a long tail of sustainment spending that outlasts the original procurement, which is precisely the profile the Flight Royalty pitch is selling.
Standardization cuts both ways. The Common Processing Architecture Mercury Systems builds around is meant to make military electronics cheaper to upgrade over time, which is good for the Pentagon and good for whoever owns the certified layer.
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