Defense Sector Mega-Mergers Highlight Why These Investments Just Won’t Quit

Defense, defense, defense. I’ve been banging the drum like crazy on that sector all year. Then this week, we saw yet another reason why it’s beating the you-know-what out of the averages: Mega-mergers!

Defense giant Northrup Grumman (NOC, Rated “A”) just announced plans to buy Orbital ATK (OA, Rated “B”) for $9.2 billion in cash and assumed debt. The $134.50-per-share price represented a hefty 22% premium to where OA closed the day before the transaction hit the tape. NOC wants to add OA’s missile and satellite components businesses to its product arsenal.

That news came hot on the heels of an offer from United Technologies (UTX, Rated “B”) to buy Rockwell Collins (COL, Rated “A-”) for $23 billion. The per-share offer of $140 in cash and stock represented an 18% premium to where COL was trading previously. UTX wants to bulk up its product offerings with the aerospace components that COL sells.

Different companies. Different strategic goals. But the end result for investors is the same: Even bigger gains! You may remember that I created a Defense & Cyberwarfare ETF Screener earlier this year to help point you towards winning defense investments. Even before the latest deal news broke, those ETFs were all trouncing the averages, as you can see in this chart …

Data Date: 9/18/2017

Specifically, the iShares U.S. Aerospace & Defense ETF (ITA, Rated “B”) was recently up 22% while the PowerShares Aerospace & Defense Portfolio (PPA, Rated “B”) was up 19.3%. That compares with a 13.2% YTD gain for the SPDR S&P 500 ETF (SPY, Rated “B”) and a 6.5% rise in the iShares Russell 2000 ETF (IWM, Rated “B”).

One key reason ITA is doing so well: ITA’s #2 holding is UTX, while NOC is #6 on the list. COL is #7, while OA is #14. But it’s not like mega-mergers are the only force driving defense stocks and ETFs higher.

President Trump has made no secret of his desire to dramatically boost domestic defense spending, in both the traditional arms and cybersecurity arenas. The increasingly belligerent saber-rattling out of North Korea only increases the chance he’ll get his way.

Other regional allies in Asia are also going to increase their own spending to deal with the North Korean threat. And after years of underinvesting in offensive and defensive weapons systems, NATO nations in Europe are finally shifting into high gear, too.

That’s why I continue to recommend you add one or more of these ETFs to your holdings. Or better yet: Get your hands on a copy of my comprehensive investor intelligence briefing American Arms Bonanza: How to Profit as Trump Spends Trillions to Make Our Military Great Again right away!

The report goes into much more detail than I can here about the investment potential in the defense sector. It also “names names” of individual defense stocks with the strongest fundamental and technical profiles. Every single recommendation from the original report is up, with most showing double-digit, market-beating gains.

Plus, I just added some critical updates to the report to account for the very-latest market and corporate developments. That includes a new sector play that’s loaded with profit potential.

So if you haven’t already grabbed your copy … read it from cover to cover … and added its recommendations to your own portfolio, I urge you not to wait any longer. Click here to get your updated version today, or call my staff at 877-934-7778 and they’ll take care of you.

Until next time,

Mike