How do you know about the competitive advantage of this IT consult (like BAH, CACI,AMENTUM) , whats the different and how to get the award from government
Hey Amup, you're asking all the right questions here. The unfortunate part is that they're almost impossible to figure out without other people's help. I'll give you a few high-level notes on what I think and what I did to figure it out.
I spent a lot of time reading industry journals, competitor transcripts, and Amentum's filings. I then tapped expert networks, scheduled calls with industry insiders, and met with basically all the peers' management teams, some multiple times. I also got on the phone with a half dozen other investors with more experience in the space to understand their thesis. Unfortunately, this kind of scuttlebutt due diligence isn't accessible to the average person. But through this, I was able to accumulate a lot of knowledge of the "fabric" of the space, let's say.
What I found was that most investors really didn't understand the stocks, even if they owned them. Times had been good for a decade, so a lot of long-term investors felt these companies were "quality," and when DOGE came around, they panicked. Amentum got whipsawed by this when they got put in the quality bucket early and people bid it up, then they were levered, and the shareholder base was mostly Jacobs long-onlys that got scared. This explains a lot of the volatility and sustained selling pressure since DOGE. I'm just giving you this color to illustrate how difficult these stocks are to diligence. Even institutional investors seem kind of fuzzy on the space.
Okay, on to your core questions. The space isn't really competitive internally. The gov't wants multiple bidders on all the contracts, and they want multiple players with IP-related services. They also want the players to be stable businesses. The result is that most contracts have multiple companies sitting on them, and rebids have a super high win rate.
That said, barriers to entry for new companies are super high—maybe even insurmountable. Small subcontractors (of which there are many) aren't equipped logistically to deliver prime-level work for the U.S. government like Amentum does. Occasionally, PE will hoover up a bunch of subscales into one big entity, usually by reformulating multiple subunits from larger primes. This is how Amentum, V2X, and Peraton were made, just to name a few. There's a lot of horse trading on contracts and capabilities in this space. A constant rotation of assets, human capital, and relationships as each prime optimizes its contract stack.
Award grants are a bit of a black box. We know who bids and how they bid, it's public information, but it's very obvious that there are tight, well-connected groups of K Street business development teams that "know the right people" to get work done. Think about this like an investment bank or a big consultancy. There are rainmakers whose job is to drive the big deals home.
On your last question, "What's the difference?" Honestly, these guys are mostly the same. CACI is more software-oriented. BAH is the flashy McKinsey of the group. They do AI and cyber. Parsons does critical infrastructure; that's kind of their big differentiator. V2X is the black sheep of the bunch; they do low-value-add grungy work, but it pays reliably. Amentum is in a weird spot where it does critical infrastructure (like Parsons), some regular contracting work, and then some grungy, low-value-add work. The last bit is why their margins are lower and also why they get a lower multiple.
Our thesis is that Amentum has excellent core capabilities in nuclear, intelligence, and space. These areas are high-value, differentiated work worth a solid multiple. However, the less attractive logistics work masks that portion of the business. That said, the low value-added work is more insulating in budget-cut environments, so that's good right now. Then, mid-term, they'll slowly divest that work and move into the higher-value stuff, which will drive a big multiple re-rate.
Hopefully, this helps you understand the space and how to better understand the stocks!
Great job, thank you for the effort. I also strongly believe in the company, and have started a position last week.
Thank you for your efforts and post. I agree and find everything you say here on point. Very informative.
How do you know about the competitive advantage of this IT consult (like BAH, CACI,AMENTUM) , whats the different and how to get the award from government
Hey Amup, you're asking all the right questions here. The unfortunate part is that they're almost impossible to figure out without other people's help. I'll give you a few high-level notes on what I think and what I did to figure it out.
I spent a lot of time reading industry journals, competitor transcripts, and Amentum's filings. I then tapped expert networks, scheduled calls with industry insiders, and met with basically all the peers' management teams, some multiple times. I also got on the phone with a half dozen other investors with more experience in the space to understand their thesis. Unfortunately, this kind of scuttlebutt due diligence isn't accessible to the average person. But through this, I was able to accumulate a lot of knowledge of the "fabric" of the space, let's say.
What I found was that most investors really didn't understand the stocks, even if they owned them. Times had been good for a decade, so a lot of long-term investors felt these companies were "quality," and when DOGE came around, they panicked. Amentum got whipsawed by this when they got put in the quality bucket early and people bid it up, then they were levered, and the shareholder base was mostly Jacobs long-onlys that got scared. This explains a lot of the volatility and sustained selling pressure since DOGE. I'm just giving you this color to illustrate how difficult these stocks are to diligence. Even institutional investors seem kind of fuzzy on the space.
Okay, on to your core questions. The space isn't really competitive internally. The gov't wants multiple bidders on all the contracts, and they want multiple players with IP-related services. They also want the players to be stable businesses. The result is that most contracts have multiple companies sitting on them, and rebids have a super high win rate.
That said, barriers to entry for new companies are super high—maybe even insurmountable. Small subcontractors (of which there are many) aren't equipped logistically to deliver prime-level work for the U.S. government like Amentum does. Occasionally, PE will hoover up a bunch of subscales into one big entity, usually by reformulating multiple subunits from larger primes. This is how Amentum, V2X, and Peraton were made, just to name a few. There's a lot of horse trading on contracts and capabilities in this space. A constant rotation of assets, human capital, and relationships as each prime optimizes its contract stack.
Award grants are a bit of a black box. We know who bids and how they bid, it's public information, but it's very obvious that there are tight, well-connected groups of K Street business development teams that "know the right people" to get work done. Think about this like an investment bank or a big consultancy. There are rainmakers whose job is to drive the big deals home.
On your last question, "What's the difference?" Honestly, these guys are mostly the same. CACI is more software-oriented. BAH is the flashy McKinsey of the group. They do AI and cyber. Parsons does critical infrastructure; that's kind of their big differentiator. V2X is the black sheep of the bunch; they do low-value-add grungy work, but it pays reliably. Amentum is in a weird spot where it does critical infrastructure (like Parsons), some regular contracting work, and then some grungy, low-value-add work. The last bit is why their margins are lower and also why they get a lower multiple.
Our thesis is that Amentum has excellent core capabilities in nuclear, intelligence, and space. These areas are high-value, differentiated work worth a solid multiple. However, the less attractive logistics work masks that portion of the business. That said, the low value-added work is more insulating in budget-cut environments, so that's good right now. Then, mid-term, they'll slowly divest that work and move into the higher-value stuff, which will drive a big multiple re-rate.
Hopefully, this helps you understand the space and how to better understand the stocks!
Thanks !!!