On Aug. 30, off the coast of Hawaii, sailors aboard the USS John Paul Jones tracked, intercepted, and shot down a medium-range ballistic missile.
It was a milestone in our nation’s defense system.
Doing so put North Korea and Kim Jong-un on notice that we can shoot down their missiles before those missiles reach the U.S. mainland or one of our Asian-Pacific allies.
And it’s about time.
North Korea’s ballistic missile and nuclear weapons programs have developed much, much faster than the Pentagon predicted. And that has created a threat that has jump-started our need for advanced missile defense technologies – and spending on them.
Indeed, missile defense technology is so critical to the United States right now that it was a big driver behind Northrop Grumman Corp. (NYSE: NOC)’s just announced plan to acquire Orbital ATK Inc. (NSE: OA) for $9.2 billion.
Orbital specializes in the missile defense technology that we so badly need right now.
And so the deal reaffirms our belief that Northrop is the best of the Big Defense plays out there. Northrop has soared nearly 46% since our first recommendation in April 2016 – including a 10% gain since the Sept. 17 announcement of the Orbital deal.
Today I want to go in-depth on why that Orbital deal reinforces our “case” for Northrop.
And I want to show you how you can take a ride on all the defense industry M&A deals we’ll be seeing over the next few years.
This single investment gained just 1.75% in 2015 – but 19% in 2016.
That’s because, instead of investing in Chinese importers, we’re focusing on internal growth in the world’s most populous nation – especially all those people’s quickening migration to the web.
Back in August we took a close look at the Emerging Markets Internet & Ecommerce ETF (NYSE Arca: EMQQ) as a bunker against tariffs.
And today I’ve got another one.
It’s great play on a $47 trillion Chinese tech market.
This market represents one of the fastest-growing global tech trends on Earth, according to new data from iResearch. This segment barely existed a decade ago but will grow by 422% between 2016 and 2020.
So let’s look at that data – and at a way to get in on this trend with a stock that’s already beaten the market by ninefold so far this year.
But maybe you’re still concerned about the wisdom of investing in a nation that President Trump has in his economic crosshairs.
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.
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.
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.