Most investors rightly focus on the long term, but on occasion, there are short-term opportunities that can be exploited.
Take the upcoming 2020 election for example.
Investors around the world will be anxiously awaiting the outcome. Of course, we're still 14 months away. And we've found an excellent profit opportunity to exploit in the run-up to the election.
I can already think of one sector that is going to run wild in advance of the election next year: defense.
Given our current political climate, it's almost a given we see more sensational headlines when it comes to policy plans. We're talking both sides of the aisle, too.
But one of the biggest issues is going to be the trade war.
U.S. President Donald Trump is going to make the trade battle with China his pet project for the year.
As the drama unfolds, what sector do you think will benefit from an uptick in trade tensions?
I'm going with the defense industry.
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The industry is already booming. So far in 2019, defense stocks have more than tripled the returns of the S&P 500.
Defense stocks are up 37% compared to 12% for the S&P 500 in 2019.
That extra oomph is a direct result of the trade war with China. Imagine what that outperformance will be when President Trump puts on his reelection show?
Investors love defense stocks during a trade war because the government favors domestically sourced materials for its supplies.
That means local companies are immune to the tariffs and many of the negative impacts of a trade war.
We already know the budget for the defense department will be higher in 2020 compared to 2019. And the budget for the Department of Defense in 2019 is a whopping $693 billion.
That spending, combined with demand for companies that do business domestically, will attract investors to defense stocks in the near term.
It's the perfect catalyst.
And this is the top defense stock to buy now according to the Money Morning Stock VQScore™ system...
The Top Defense Stock to Buy Before 2020
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The VQScore system gives its highest score of 4.9 to Park Aerospace Corp. (NYSE: PKE), and for good reason.
The company provides composite materials to the aerospace industry.
And its business is expanding...
Last month, Park announced it would be expanding its manufacturing capacity in Kansas.
Thank tariffs for providing the incentive for domestic manufacturing.
Not only is Park operating in that sweet spot of the economy, but it also paid a special dividend earlier this year totaling $4 per share.
At current prices, Park offers investors a solid dividend yield over 2%.
But best of all, Park has not caught up to the rest of the defense stocks that have been outperforming this year.
That may have more to do with the fact that the company is a small-cap stock. Investors have shunned small companies in 2019, with many trading in bear market territory.
There is indeed a dichotomy in the market that investors can exploit.
While shares of Park have not declined like many other small-cap stocks, they have not appreciated like one would expect given the exposure to the defense sector and domestic manufacturing.
When a blustery campaign season brings sensational headlines, Park should get a boost.
Between now and the end of next summer, a 50% gain in share price is possible.
That's not bad, given the overall market volatility we've seen this year.
In fact, volatility will likely spike in 2020 as various scenarios get priced into stocks.
The one thing we can count on is more bluster ahead of the 2020 elections.
That makes this the top defense stock to buy today...
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