Welcome to the Best Ideas Club. As a paying member, you get a report every Sunday that unpacks one actionable, high-conviction investment idea sourced from an interview with a world-class investor.
This week we interviewed Tony Bancroft, a portfolio manager at Gabelli Funds, an investment firm with over $31 billion in assets under management.
This Best Ideas report was originally published in April 2025.
Tony Bancroft’s Best Idea: Ducommun Inc (DCO)
DCO is down 12.63% year-to-date
Thesis:
Tony Bancroft’s research focuses on the aerospace industry, and he sees Ducommun as a “dramatically under-appreciated” multi-year investment.
In his view, the business benefits from high switching costs, long-term contracts, and sticky after-market revenue, all of which make it a durable, secular stock pick across economic cycles.
DCO is flat over the last 12 months
Shares closed at $55.56 on Friday, April 11. Bancroft forecasts the stock to surge above $100 per share over the next 18 to 24 months, or about 79.9% upside.
He anticipates the stock staying a winner for years to come.
A booming commercial industry
Ducommun makes complex structural assemblies and electronics systems for both commercial and military aircraft. Once its products are embedded in a platform or aircraft — like Boeing or Airbus fleets — the contracts often last a lifetime due to high switching costs.
Bancroft sees the commercial aerospace industry entering a multi-year uptrend:
Boeing plans continue to ramp up production of 737 models every quarter
Airbus is similarly boosting output amid record backlogs
Global commercial fleet size — about 28,000 currently — is expected to double the next two decades fueled by travel demand, emerging market growth and the rise of low-cost carriers
Meanwhile, the defense side of the business is experiencing a separate, powerful tailwind.
Global geopolitical instability has surged since 2022, and the coming years will likely bring more of the same, Bancroft said. That’s one driver of the US Pentagon’s recent announcement of a $1 trillion defense budget. NATO allies are also ramping up defense spending.
Long-term programs across missiles, radar, and aircraft-modernization mean defense contractors like Ducommun are seeing decade-long visibility for revenue.
Importantly, most of the company’s supply chain and operations are US-based, which help insulate it from the volatility of international trade and tariffs.
Over the last 12 months, DCO has outpaced its industry competitor Spirit AeroSystems Holdings (-5.53%), while lagging CPI AeroStructures (+25.81%) and Magellan Aerospace (+46.64%).
DCO has lagged two of its primary competitors over the last 12 months (Chart: OpenBB)
Notable catalysts:
Boeing production ramp: New plane deliveries mean more revenue
Defense spending: Post-Ukraine war, global military budgets continue to break records
Aftermarket tailwinds: Once Ducommun is signed on as a contractor, it’s typically locked in indefinitely
M&A optionality: As a subscale player, Ducommun is an increasingly attractive acquisition target
Tariff uncertainty: Ducommun’s US-based operations give it an edge on competitors with more fragmented, international supply chains
Risks and considerations:
Tariff exposure: Minimal impact on immediate business, but a trade war remains a macro risk
Defense budget uncertainty: Political shifts or regime changes could bring volatility to the stock and business
Execution risk: Operating leverage depends on OEM production schedules
Key financials:
Not only does Ducommun have strong fundamentals, but it trades at roughly 10x EBITDA, a steep discount to the aerospace and defense industry average of about 15x-20x.
Market capitalization: $825.81 million
P/E ratio: 26.48x
2024 net revenue: $786.6 million, a record high for the second year in a row alongside all-time high gross margin of 25.1%
52-week high: $70.50
52-week low: $51.39
Additional investor resources:
For more about Tony Bancroft’s work and firm, visit here.
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