Global events might have clients curious about defense names. We review a handful in today's featured article.
“Buy what you know” is a classic saying that suggests our clients are going to buy the brands/things they see around them in their day to day life. From their driveway, to Super Bowl ads, to their favorite clothing brands, today’s hot topic will most likely end up in your client’s portfolio one way or another. While most of the time this can simply take the shape of buying GM or F, in times of global unrest clients can be more attracted to defense names… the ones they see on the nightly newscast as they keep up with the times. Regardless of how interest is spurred, many of you have most likely received an influx of client requests asking about defense names and how you are positioning portfolios in the event of continued global unrest & uncertainty. Today’s featured article will give you the “ammo” to effectively tackle those conversations.
Exactly how much of an impact wartime/greater global unrest (with distinct American involvement) is actually quite tricky to pin down. Exact start/end dates of many global conflicts in a post 9/11 world is foggy at best, so isolating specific timeframes for a performance comparison is a nearly fruitless endeavor. Regardless, using the start of the 21st century as a guide, an Aerospace & Defense representative PPA has outperformed the S&P 500 by nearly 1,200% (1,465% vs 307% respectively.) While it goes without saying that not all that outperformance can be attributed to international conflict, the metric sets the stage for the rest of the today’s piece.
Speaking of PPA, some clients may be unable/unwilling to take up focused positions on some of the stocks we will go through down below. Up nearly 19% so for in 2025 (through 6/17), the fund holds a near-perfect 5.88 fund score, outpacing the average US Fund by over 2.50 points. The long-term picture is quite productive, but more defensive clients may be discouraged by the lack of traditional support offered until 2025 lows, a near 25% haircut from current trading levels. Said clients may be best suited waiting for more near-term support to be established more logically around the middle of the trading band. More aggressive clients are fine to begin dollar cost averaging into positions around current levels to take advantage of continued high momentum. Regardless, consider using the alerts function to be notified of specific price changes as they come down the barrel.
Looking underneath the hood at a handful of the most recognizable defense names, most of them fail to earn a technically actionable TA score at the time of this writing. With that in mind, continue to monitor the likes of NOC, LMT, etc. for further improvement in their overall technical posturing. One previously unactionable stock that recently saw meaningful improvement was General Dynamic (GD), triggering a bullish catapult pattern on 6/13/25, coinciding with a positive trend shift on the same date. With that in mind, GD has reestablished a technically strong score and will look to continue to build out a strong relative strength profile on its way up toward all-time highs in the $310’s.
With the understanding that several of the big players on the defense stage aren’t yet technically acceptable, we can shift our focus elsewhere. Kratos Defense & Security Solutions (KTOS) ranks in the 4th position of the Aerospace Airline Matrix. Sitting on a string of four consecutive buy signals on its default chart, the perfect 5/5’er has a range of support between $33 & $38. While it is trading near heavily overbought territory at the time of this writing, the weight of the evidence is higher for those aggressive clients looking to pick up focused exposure.
It goes without saying that things could change rapidly and the headline driven tailwinds for defense names could dissipate. Regardless, it is probably worth having a few names on deck in the event that a client does call in and ask about how they are positioned as we move into the back half of the year.
