The Intellectual Investor – Value Investing by Vitaliy Katsenelson The Ability to Suffer – Part 2 – Ep 268
Nov 6, 2025
Vitaliy dives into the financial turnaround of Babcock, highlighting its improving performance and leadership under CEO David Lockwood. He explores the strategic importance of Babcock in the UK defense sector and its unique shipyard capabilities. The discussion also touches on management's ability to endure short-term pain for long-term gains, the role of investor patience, and the importance of aligning interests between management and shareholders. He shares insights on automation in shipbuilding and the cautious approach to client relationships.
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Turnaround Fueled By New Leadership
- Vitaliy describes how Babcock transformed under two Davids who simplified the business and paid down debt.
- The visit to Plymouth highlighted an irreplaceable UK shipyard that services nuclear submarines.
Quality And Tailwinds Narrow Risk
- Babcock's unique asset base and improving fundamentals narrowed outcome ranges and increased its value despite a higher price.
- Growing UK defense needs and recurring revenues suggest a path to a significantly higher stock value by 2029.
On-the-Ground Proof Of Operational Quality
- Vitaliy recounts his January 2024 visit where morale was high and the turnaround felt real, with management creating future optionality.
- He describes Roseth's missile-tube facility and the precision and automation that impressed him.
