After the outbreak of war in Israel this past Saturday, one particular sector of the stock market got a predictable bump as markets opened this week: defense stocks.
Several of the major players got a big bump—Lockheed Martin Corp (LMT), Boeing Co (BA), and RTX Corp (RTX) aka Raytheon to name a few—on Monday, soaring anywhere between 5% to 10%, putting them on everyone’s watchlist and bringing a bunch of investor attention to the space.
If you happen to have caught that bump, congratulations, and I hope you have protective stops in place to protect your profits. But for everyone else, I’d be very wary of trying to chase them now, at least as a whole, and I’m skeptical that we’re looking at any kind of long-term growth trend here.
In fact, I typically don’t invest or trade in the defense sector, and for good reasons. While many of the biggest names in that space are stable companies with decent profit margins, the stocks as a whole just tend not to go anywhere. On top of that, very few of them pay a dividend, which makes them a poor choice for parking my capital in general.
But that doesn’t mean there aren’t opportunities here, especially given how oversold some of these companies are. If you’re careful, keep stops in place, and explore shorter-term trades like call option spreads, you have a decent shot at seeing good returns.
Check out this video for the smart plays right now, and the firms you want to avoid like the plague:
— Shah Gilani
Source: Total Wealth