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:
Like I said, while there is money to be made here-as there is in any market-there's bigger profit potential by thinking outside the box a little and investing in a tech that the defense industry is becoming more and more dependent on by the day: artificial intelligence. Some of the most advanced AI applications we have now were developed through defense industry contracts, and there's going to be plenty more spending in that arena to come.
Investors who set themselves up the right way now could ride the AI industry's skyrocketing growth to potentially achieve generational wealth. Unlocking the highest profit potential here involves more than just throwing a bunch of capital into the big names like Microsoft and Nvidia.
Fortunately, I've got a roadmap that shows you exactly what to do. You can get it at this link.
The post Why You Should Be Careful with Defense Stocks Right Now appeared first on Total Wealth.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.