Alex Silver pitches BWX Technologies at Sohn 2026

Hi, I am Alex Silver and I am your little boo thing. I am also the CIO of A&M Capital Management which Charlie Penner and I co-founded in 2024. We manage 350 million dollars and are actively engaged investors in higher quality businesses. The opportunity that I'm going to discuss with you today lives at the intersection of multiple sustainable secular growth trends. The first is addressing the increased energy needs across the country, data centers and beyond. The second is increased defense spend and the third is the overlap of those two which is energy security. That company is BWX Technologies. BWX is a 20 billion dollar market cap that is best known for making the reactors that power the U.S. Navy submarines and aircraft carriers. They have been an incredible track record having built over 400 nuclear cores for the Navy over time without a single safety incident. The business itself can be divided into two segments. The larger of the segments, government operations, accounts for about 75% of the company's revenue and it differentiates BWX from its other competitors in the nuclear power space like Oklo and NuScale in that it gives BWX a business to build upon. The other 25% of revenues is commercial operations. Now that exposes BWX to the significant upside in the commercial nuclear power opportunity. Currently BWX serves this market as a service provider for fuel component and other services. Let's first dive into the to the government services operations. Look BWX has been supplying the U.S. Navy with nuclear operations since the 1950s when it was part of Babcock and Wilcox which in itself has a legacy that goes back to the 1860s. In fact B&W designed and supplied components and services for the first U.S. nuclear sub, the USS Nautilus which was launched in 1954. It was an equipment and service provider from the Manhattan Project and today BWX Technologies is the only company to possess NRC category one licenses. These are some serious nuclear chops. We like this business for some pretty obvious reasons. The government business provides durable long-term and growing contracts that obviously benefit from increased defense spend and ultimately from spend on space projects. The barriers to entry about as high as you could find for a business in addition to its 60 plus year track record it has a highly specialized manufacturing footprint with the only certified large nuclear component manufacturing capacity in North America. It has a highly skilled workforce. 95 percent have government security clearances and it has sole source contracts. Some serious moats folks. Importantly the government business also gives BWX a springboard for developing its portfolio of commercial nuclear opportunities. So let's move over to the commercial space. We're going to make a quick spinoff on the pharmaceuticals that are used in medical diagnostics and treatments. This is a small but high growth high margin and high quality business. We're going to focus now most of our time on the core of the commercial operations business which is commercial nuclear power. So currently BWX is the picks and shovel supplier to the nuclear to companies building their own reactors in the commercial nuclear industry but instead of picks and shovels they make things like that 90 foot tall and 500 metric ton presser vessel that houses a nuclear core. Assets that don't get much heavier or lower obsolescence than that. The same high barriers to entry exist for this business as for the other ones but importantly BWX is producing revenue today unlike some of its peers whose revenue is entirely in the future. Now commercial nuclear is a growth market especially if we're going to meet the demands that are expected in the future from AI and other aspects of society but it also enjoys rare bipartisan support including recent executive action that shortened the timelines for NRC certification of reactors which reduces both the timeline to approval and the cost of doing stuff to get there. So speaking of the nuclear market let's talk about its structure. First there are traditional reactors. Think about a gigawatt or so in power. Those power those provide enough power for a city of 800,000 to a million people. Then there are small modular reactors or SMRs. Those are about 300 megawatts at most or less and on the larger end can power a large data center. Unlike traditional reactors SMRs are made in a factory and are modular so they can be stacked to meet demand as needed and they also have efficiencies of scale at manufacturing. If we were to look at SMRs you can split them into two categories gen 3 and gen 4. Gen 4 reactors typically rely on unproven technology and systems versus gen 3 reactors which are already in use in traditional reactors today. So gen 3 reactors can be further split into boiling water reactors and pressurized water reactors. In a boiling water reactor the heat from the rods heats the water which turns into steam and spins the turbines. In a pressurized water reactor the pressure keeps the water from boiling and that water then goes through a steam generator which produces steam. Before going deeper on this path I want to address a debate about SMRs up front. Some argue that it's going to be too late for SMRs to meet the current wave of energy demand. Well we at Anonym have an entirely different view. With on-site power options like fuel cells and reciprocating engines that are available today they can't possibly meet the long-term energy demands that are forecasted. So we believe the bogey is to deliver a power on time frame competitive with large gas turbine fired plants which now take about four to five years based on the backlog of parts. While some players like Oclo and NuScale could struggle to be competitive in this time frame we believe it's possible for other SMRs to be competitive on a time to power basis. In the boiling water SMR category GE Hitachi's BWRX 300, 300 megawatts hence the 300, are already under construction today. In fact it's one of the SMRs that BWX is working on and they have an estimated delivery period of four to five years. However there are only so many SMRs that GE Hitachi can make and not all buyers are going to want boiling water reactors. Some will prefer pressurized water reactors in the SMR space and that's because in the traditional reactor space pressurized water reactors are actually more common and well known so they should be cheaper to construct. If you go on the US submarines I referenced earlier all the BWX reactors on them are pressurized water reactors. Despite all of this at this very moment there is no clear leader in the SMR pressurized water reactor category which is where things really begin to get interesting. About a decade ago BWX developed a pressurized water reactor called M-Power which was way ahead of its time in terms of customer interest but was favorably viewed by the regulators including the NRC at the time. The design was very attractive and significantly advanced and based on our diligence could be still competitive on a time to power basis. If the company were to develop this SMR BWX could also leverage its existing capabilities and credibilities in the SMR space. In fact if you want to see an SMR that is operating outside of the tiny ones floating on a barge supposedly in Russia or China you'd have to find a navy submarine board it and there you will see a pressurized water reactor SMR built by, you guessed it, BWX. Of course BWX should only do this if they believe customer interest exists to de-risk the project but we believe it can do so and could even begin commercial discussions today based on the existing M-Power design as it is updated. This leaves BWX with several attractive paths to create value from here. The first option is to stay only as the Piction shovel supplier and continue to supply large reactors and boiling water SMRs with parts and services and wait for another company to take the lead in the pressurized water reactor space, SMR space. Another option would be for BWX to develop M-Power either on its own or through a joint venture and thus capture more revenue for each reactor than just being a supplier of components and services. Importantly we don't believe this would cannibalize existing sales to a significant degree given that there are different buyers for pressurized water reactors and boiling water reactors in the traditional space and the SMR space. The company itself and its investor materials believes the SMR space will be 300 billion by 2040 alone. Furthermore based on the company's recent quarterly conference calls and the CEO's comments we think that we agree with what they say and they agree with our perspective. I quote the CEO's words, if we're going to decarbonize the grid, meet the energy needs of AI, meet the energy needs of electrification, we're talking about hundreds and hundreds of reactors globally. Large reactors translate that into thousands if it's small reactors. We are very bullish on this opportunity. So what does all of this mean for the stock? Well today BWX is about $200 and we believe there are multiple paths to create significant upside from here. If the company continues to act only as a merchant supplier to other SMR companies and including announced opportunities not fully in consensus numbers and the base business continue to grow as it is, there's about $95 or 45% upside in the next few years. Layering on the probability adjusted of picks and shovel wins for known projects that are not yet awarded is another 50 bucks or 25%. Now should BWX choose to develop Mpower on itself or through a joint venture in addition to being a supplier to others, we see an additional upside in the range of 80 bucks or 40%. Altogether that's over 100% upside from current levels. And of course the downside is protected here by the company's government business, which I remind you is contracted, growing, and sole-sourced. That differentiates BWX from its other nuclear competitors that face far more binary futures. So that's BWX. Thanks very much.