Our Top Pick for income-oriented investors has only been public since 2011 but it is a name we believe to be a quality compounder for the long term, explains money manager Peter Mantas, editor of Logos LP Blog.

Huntington Ingalls Industries (HII) is the largest repairer and ship builder for the U.S. Navy and U.S. coast guard, giving the company a near monopoly on these government contracts (which is why their return on equity is north of 27%).

The company has only an $8.5 billion market cap, which is much smaller than other defense contractors -- with much less competition.

As a result, we expect further growth in this area not only from natural price inflation of services provided (time value of money) but also due to potential upswings in defense spending under Trump.

We believe HII will be the single biggest beneficiary of these policies given its near monopoly and close ties to the Federal government.

The company has doubled its dividend over the last 2 years, has tripled net income and more than doubled operating cash flow over the last 6 years.

It has a very healthy payout ratio of 22.2% (we see more dividend increases in the future) and revenue in the trailing twelve months has increased well over $7 billion, with our revenue projections hitting $8 billion in 2017.

The company has a forward P/E ratio of 17.7, which isn't terribly expensive, but our entry point in the name would be below $165.

Our price target on this particular name is $257, implying a 40% return from current levels (roughly $12 billion market cap).

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Editor's Note: Peter Mantas chose Global Brass and Copper Holdings (BRSS) as his Top Pick for in 2016; the stock has risen 67%. Peter now says, "Despite a great run last year, we believe the name still has room to run in 2017. Expect continued growth in this market as infrastructure and construction picks up. 

"We would caution that if the name does get ahead of itself, taking profits would not be a bad idea later in the summer. Our price target on the name is $45, but wouldn't be surprised if it broke past those levels in 2017."

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