We’ve talked about some truly revolutionary tech developments rocking the entire defense sector right now, like laser weapons, advanced drones, helicopters, battlefield AI, and global awareness.
It all sounds very sci-fi, but it’s happening now (and making us some serious money).
I want to talk about something a little less flashy but perhaps even more important to keeping our armed forces effective when boots are on the ground.
It’s not headline-grabbing, and you certainly couldn’t call it “state of the art.” In fact, at less than $5 billion, it’s a relatively small, overlooked niche in one of the world’s most lucrative, high-profile sectors.
That’s just one of the reasons why I love it right now.
A rogue nation and its cartoonish, unpredictable leader fire two ballistic missiles towards its rival neighbor, a vital U.S. ally. Then the nation claims to have detonated its most powerful atomic bomb ever, which it says will fit nicely on a warhead fitted to those ballistic missiles.
A strongman in charge of a world power decides to invade a sovereign country to “reunite” half its territory with the mother country – twice… and both times during the Olympic Games.
As we all know, these events weren’t lifted from the plot of a spy novel.
They’re happening in the world today. Border wars, frozen conflicts, and saber rattling in the South China Sea, Ukraine, the Russian Caucasus, the Korean Peninsula, Syria, Iraq, Yemen, and Saudi Arabia don’t show any signs of letting up.
A global economy lurching toward recession, bad planning, and poor leadership across the globe don’t help international tensions, either.
But this is precisely the kind of environment lucrative defense stocks thrive in.
In fact, nervous nations with deep pockets are propelling the entire defense sector into a “supercycle” that could be good for steady gains for the next 20 years.
And it doesn’t matter who wins in November, either…
Last week, I recommended picking up shares of Northrop Grumman Corp. (NYSE: NOC) on the dual trend of increasing global tensions and rising defense budgets.
Those shares have already run up 23.5% in the past 12 months. That would be an impressive feat for a small cap, but Grumman is one of the five biggest defense and aerospace firms on the planet.
These kinds of gains prove our thesis about investing to follow Rule No. 3 and “Ride the unstoppable trends.”
Grumman has good company on its ride into the stratosphere. And there is so much money pouring into the defense sector right now – more than $1.75 trillion by 2020 – that it makes sound investment sense to open up our exposure to it a bit and capture even more of the gains this growth sector is offering.
Last week’s 51st Bi-annual Paris Air Show was the event of the year for the Aerospace industry.
Held in Le Bourget Airport in Paris, France, this prestigious air show has brought together industry leaders from across the globe to hunt for new commercial opportunities – and over 2115 exhibitors marketing their latest and greatest projects – for the last century.
As the largest, and longest-running, aerospace trade show in the world, the Paris Air Show features companies from over 44 different countries, 285 official delegations, 3,100 international journalists and nearly 139,000 professionals’ year-over-year.
But you don’t have to be perusing the Parisian halls of Le Bourget to be a part of the action.
For investors, like us, the Paris Air Show is a tipping point for the entire aviation industry. Investors look at this week-long battle royale as a make-it-or-break-it moment to see who will be the leaders in this highly competitive industry and who is likely to come up short.
I’ve been telling you for two years now that we are in the midst of the largest aviation boom in history. An industry that analysts believe could soon topple $5.6 trillion in the next few years.
No doubt, that’s a big number. But it greatly understates the potential that tech investors can find in aviation-related plays.
According to Allied Market Research, by 2020 the global robotics market will reach $82.7 billion, ballooning at a 10% compound rate.
That mammoth grow is being fueled by tech stalwarts like Amazon.com Inc. (Nasdaq: AMZN), AppleInc. (Nasdaq: AAPL) and Google Inc. (Nasdaq: GOOGL).
My most recent interest in robotics was piqued by a seemingly minor acquisition that Teradyne Inc. (NYSE: TER) just made.
In a time of near-weekly multibillion-dollar deals, Teradyne’s acquisition of a Danish robotics firm for $285 million sounds like small potatoes. But take a look at what that robotics firm is doing:
For Universal Robots, the firm Teradyne bought, sales grew last year by some 70%. And since late 2010, the firm has sold more than 4,000 robots worldwide, increasing sales by 10-fold in the process.
About a dozen years ago, I found myself having a stimulating conversation one sunny day in San Francisco with the great economist Milton Friedman.
It’s a conversation I’ll always remember.
I studied economics in college – in fact, I’m the recipient of an honors degree in that subject – and the tireless free-market advocate was and remains one of my big heroes.
We were standing on the balcony of his spacious Nob Hill condo taking in the sweeping Bay views and talking about economics and Washington politics – as I eyed the huge portrait of him standing in a corner that Friedman’s wife hated and wouldn’t let him hang. Then he looked me in the eyes and said, “You know, Michael, I’d like to see the Federal Reserve replaced by a computer.”
As the 1976 Nobel Prize in Economic Sciences laureate explained it, he felt the Fed had become too obsessed with micromanaging the nation’s economy. Remember, this was a dozen years ago, before the Fed started quantitative easing and heavily manipulating interest rates.
Of course, I’m not suggesting we replace the Fed chair with a robot.
But I always recall Freidman’s thought experiment whenever the markets get choppy, as they have in the past few weeks. And when I see the markets become volatile because of the Fed and the news, I know it’s time for defense.
I’ve before shared with you my five “Choppy Market Tools.” But today, I want to share with you a classic investment strategy that I’ve given a brand-new nickname to reflect our focus on the “New West” of Silicon Valley tech stocks.
I call it the “Cowboy Split.”
And today I’m going to show you that when employed properly the Cowboy Split will protect you from volatile markets.
You know I get stoked when a stock I’ve recommended to you does well. So you can imagine how excited I am that I now get to recommend a stock all over again.
Thanks to a selloff shortly before I first shared this stock with you, we were able to buy this stock relatively cheaply. And since then, just five months ago, the stock has soared 105%.
And I think today’s price, about $56 a share, is still too cheap.
Over the last three years, this company has increased earnings per share by an average of 73%. For now, I’m going to be conservative and assume it grows by only one-third that amount going forward.
That would give us earnings growth rate of 24%. At that rate, profits and the stock price could double again in as little as three years.
This is a stock that provides us with a buffet of choices.
We can sell it and make our double. We can keep it and watch it quadruple. Or we can buy some more, and then watch our portfolios soar higher and our retirements grow more secure.
Today, I want to explain why this stock continues its upward trajectory.
We all know what a lousy winter this has been. So if you’ve been doing any traveling, I’m hoping you haven’t been victimized by one of the 75,000 commercial flights that the nation’s airline industry has scrubbed since Dec. 1.
That’s the industry’s worst showing in 25 years, says The Associated Press.
As a frequent flier myself (I rack up some serious travel miles jetting from one CEO meeting to another, and then onto one of my media appearances on CNBC or Fox Business), I feel real empathy for those of you who’ve been stranded in a cold, uncomfortable airport terminal.
But when I saw these statistics, I knew there was a bigger story at play here – a story with the kind of financial heft that spells profits for investors who are savvy enough to zero in. Because this story has yet to hit Wall Street’s radar screen, you have the chance to score major outsized profits.
Then we had to deal with the whole Team Bernanke “taper drama.”
And now we’re barreling into yet another “Fiscal Cliff” street fight.
With U.S. stocks trading at unsustainable highs, I can sympathize with those of you who look at these headlines with fear; you view each day’s events as just the latest potential investing calamity, and worry they might ignite a single-day sell-off severe enough to eviscerate years of diligent saving and personal sacrifice.
I can even understand why many of you would like to scamper to the supposed safety of the sidelines.
But don’t do it.
The sidelines, you see, aren’t as safe as you might think. Missing the good days can be worse than riding out the bad ones. And you run the very real risk of getting left behind: 57% of American investors don’t even have $25,000 to their name.
But there’s a way to stay invested – to keep pursuing the life-changing profits that the “right” tech-sector stocks can deliver – even as you muscle aside the painful gut punches that today’s volatile markets can inflict.
It promises to spot terrorists – before they strike.
It will predict killer storms – warning us when and where they’ll hit.
The new technology trend known as “Big Data” is sweeping the globe, and is expected to facilitate stunning – even life-saving – transformations in intelligence-gathering, meteorology, medicine, finance, and virtually every other field you can think of.
But only if a major problem can be solved.
That problem – a critical obstacle, really – is one that keeps getting in the way. It’s called the “memory wall” and it’s the one digital barricade that every computer engineer in the world wants to hurdle.
Today I’m going to give you a peek at the potential solution to this digital bottleneck – a solution so revolutionary that a respected trade journal recently named it one of the 10 technologies most likely to transform the electronics industry.
I’m going to introduce you to the “Killer Elite” that cracked this computing conundrum.
And I’m going to tell you how you can profit from an innovative breakthrough that most retail investors aren’t even aware of yet.
As we all know, these events weren’t lifted from the plot of a spy novel.