BWX Technologies

In what is likely to be a fractious, spittle-flecked election run-in there are not many things that both Republicans and Democrats appear to agree on. There are a few: bad schools, unaffordable healthcare and perhaps concerns over not enough dollars in retirement pots, but not much else. It’s blue, or red. And nothing in between. That said, it was interesting to read the Democratic Party platform that was recently released. In it the Democrats have changed their stance on nuclear energy, favouring a ‘technology-neutral’ approach. This includes all zero-carbon technologies including, in amongst geothermal and hydro-electric power, ‘existing and advanced nuclear’. This is a big change, and is the first time since Richard Nixon was shuffling around the White House that both parties have lined up with a positive rub on nuclear energy. This, on the surface, might be a positive for BWX Technologies, a nuclear technology specialist, but it’s not. The company doesn’t refurbish nuclear power plant operations in the US; only Canada and China. BWX is, though, an interesting company involved, as it is, in nuclear reactors. Indeed, it is the only manufacturer of large reactor components in North America. A big customer is the US Navy. The US Navy orders very big ships and very big submarines, with very long lead times. This flows through to solid, double-digit operating margins, and very high visibility on future earnings. For those with an eye on exciting future growth prospects, the company is also involved in medical isotope production for hospitals and radiopharmacies, where it has invested in a unique manufacturing technology that opens up the North American market. There are many uncertainties blowing around the soon-to-be-here US election, but there are some modestly rated businesses that are quietly seeing improving long-term demand fundamentals against this gaudy backdrop. BWX appears to be one of them.