A Defensive Post-Inauguration Stock Play
So Wednesday is the big day… the swearing in of Joe Biden as the 46th president of the United States.
It’s not only an important day for our country, as it is every four years, but also an important inflection point for an overlooked part of the stock market: post-inauguration defense stocks.
And the play I like to kick off the Biden era is an overlooked and undervalued stock that could rise 50% or so over the next two years.
That’s not a rocket shot by any means, but this post-inauguration defense stock also won’t crash if we see a bigger stock market correction somewhere in the not-too-distant future — which is likely. That’s important to keep in mind as our market melt-up continues and our risks rise accordingly.
A Post-Inauguration Defense Stock
When traders sit around and talk about the stock market, it becomes a story-telling contest. This often takes the place of real logic and analysis. It’s just human nature.
And when it comes to defense stocks, there are three narratives that have made the rounds in the past couple of years:
- Why would you buy a defense stock that is growing at 10% or 15% a year when you can buy a tech stock that’s growing at 30% a year?
- The pandemic dealt another blow to defense companies because many of them also sell parts and equipment to the commercial airline industry, which still has much of its fleet in mothballs because of COVID-19.
- The Biden administration will somehow be hostile to defense companies, therefore defense stocks aren’t a good bet (this story is a more recent addition).
As a result, many defense stocks haven’t moved up much if at all. The iShares U.S. Aerospace & Defense ETF (BATS: ITA), a defense sector ETF, shows this underperformance. As a group, it’s down 18% from a year ago, compared to nice gains from the Nasdaq and S&P 500 indexes.
I think that may be about to change as the Biden administration is sworn in and gets to work, relieving the uncertainty hanging over the sector.
Check out my short video and I’ll reveal my post-inauguration defense stock pick. Then share your thoughts below. Are there any plays on a Biden presidency you’re looking at?
And as always, send your investing questions to jeff@yastine.com. Be sure to subscribe to my new YouTube channel. You can also follow me on Twitter and Facebook.
P.S. Time Is Running Out to Learn This Strategy
If you’ve been around the trading block… you’ve probably heard of iceberg trades…
Big hedge funds have been orchestrating sneaky moves causing stock spikes after an initial dip in value. WealthPress Head Trader Roger Scott likes to call it a “V-Bounce.”
If you’re able to spot the start of this “V,” it’s likely an iceberg trade has been moving the needle beneath the surface.
When used correctly, it can identify big wins. Roger’s system scanned a “V” beginning to form that resulted in 104.26% gain on NVO!
And another one could be forming soon…