Too many investment analysts and pundits like to issue wishy-washy recommendations, namby-pamby forecasts, and half-baked observations that don’t do anyone any good. Not me. I’ve never been afraid to tell it like it is.
So, let me be abundantly clear today: There is one investment your portfolio absolutely, positively should NOT be without.
Look, I’ve been pounding the table on these stocks for more than a year now, including in these January, February, and March columns. The main reason: Donald Trump’s election would lead to a huge surge in defense spending. But the news has gotten even more positive since then, at least from a spending perspective.
The Senate just sent President Trump a $700 BILLION defense bill, packed with $634 billion in “base” defense funding and another $66 billion in “special” funding above and beyond that. That was far more than the $603 billion Trump originally sought way back in May. The President also recently asked Congress to authorize an extra $5.9 billion to pay for missile defense on the Korean peninsula, additional troops in Afghanistan, and ship repairs for the U.S. Navy.
Legislators are still wrangling over the precise details, so it remains to be seen exactly what kind of funding bill makes it to Trump’s desk. But I’m pretty darn certain it will open the floodgates for massive spending on ships, airplanes, missile defense, and several other critical defense programs.
You don’t have to search too hard for the reasons why. The biggest one is in the headlines all the time: North Korea! The rogue nation just conducted its most aggressive, assertive ballistic missile test to date, shooting off a missile that flew the greatest distance and the longest time ever.
Its launch angle was very steep, so the missile landed in the Sea of Japan only 600 miles from its point of origin. But given its 53-minute flight time, and assuming it had been fired at a more-normal trajectory, it might have been capable of reaching even major East Coast cities like Washington D.C. or New York. Heck, Hawaii is now reviving a long-dormant “Attack Warning Tone” drill that’s designed to get residents prepared for the threat of an actual missile strike.
My advice? Make sure you own at least one of several ETFs or mutual funds focused on the defense and aerospace sectors. This Defense & Cyberwarfare ETFs Screener, which I created using the tools available at the Weiss Ratings website to premium subscribers (Click here to join them), shows the performance of the leading sector ETFs. I also included the SPDR S&P 500 ETF (SPY, Rated “B”) and the iShares Russell 2000 ETF (IWM, Rated “B”) for comparison’s sake.
|Data Date: 11/29/2017|
What you see right away is that there really isn’t any comparison. The iShares U.S. Aerospace & Defense ETF (ITA, Rated “B”) and the SPDR S&P Aerospace & Defense ETF (XAR, Rated “B”) are blowing the market out of the water! They were recently up around 31.6% and 30.4% year-to-date, respectively, compared to 19.4% and 14.5% gains for the SPY and IWM. The same goes for the Fidelity Select Defense & Aerospace Portfolio (FSDAX, Rated “B”), the specialized mutual fund that dates all the way back to 1984. It’s up 31.2% YTD and more than 151% in the past half-decade.
If you don’t own at least one of these investments, you’re doing your portfolio a great disservice. The political AND geopolitical backdrop couldn’t be more favorable for this industry or these funds.
In a way, that’s unfortunate, because it says a lot about this dangerous world we live in. But as I never tire of saying, we have to invest for the world we have not the world we wish we had. So that’s why I’ve been highlighting, and am continuing to highlight, funds like these.
As a matter of fact, the prospects for defense investments are so positive in my view that I’m going to go one step further. I’m going to reveal my favorite stock in the sector on Monday.
It’s one I recently recommended to my High Yield Investing subscribers, and one that’s already generating open gains for them. If you want to get these kinds of picks first, as well as specific “Buy” and “Sell” recommendations, all you have to do is join them by clicking here.
But I believe its unique line of businesses and products, as well as its strong fundamentals, are so promising that I had to share it with you as well. Be sure to keep your eyes on your email next week for the big reveal!
Until next time,