Our latest featured stock is an aerospace and defense company that offers a broad portfolio of products and services in aviation, combat vehicles, shipbuilding, and communications, explains Charles Mizrahi, editor of Hidden Values Alert.

General Dynamics (GD) offers segment diversification. Although the US government accounts for nearly two-thirds of the company's revenue, it has four operating segments, with no single division accounting for more than a third of total revenue.

Segment diversification allows the company to weather the effects of recent defense spending cuts. Ultimately, GD's sound fundamentals offer the company a strong long-term outlook.

Its aerospace segment has experienced strong double-digit growth over the past two years (15% and 13% year over year, respectively).

Robust demand for business jets helped offset defense funding cuts. Its line of Gulfstream models caters to the commercial market and offers the company another source of revenue (in addition to its military operations). GD controls nearly 30% of the commercial jet market.

GD has total backlog of more than $48 billion. Strong orders for its recently launched G650 commercial jet account for nearly $13 billion in backlog. The company was also awarded numerous military contracts, which account for the remainder of its backlog ($34 billion).

The company's longstanding relationship with the US government is a strong barrier to entry in the industry. Competition is limited to companies who secure contracts with the DoD and receive the necessary clearance. GD is a member of a duopoly (with Huntington Ingalls (HII)) of companies who manufacture US Navy submarines.

GD has more than $4 billion on its balance sheet, with no short-term debt. It consistently generates close to $3 billion in operating cash flow per year. The company allocates a significant portion of its cash flow to shareholder returns.

The firm has allocated nearly $5 billion to share repurchases in the past five years. This has reduced shares outstanding by more than 8%. The company also distributes a $2.24 annual dividend, which represents a 2.5% dividend yield.

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