Another Way to Generate Profits from Playing 'Defense'

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You know the mantra I’ve been preaching since early 2018: Playing “defense” will pay off best. That’s because overhyped, overowned, high-flying, high-risk stocks aren’t leading the market anymore. Higher-yielding, anti-recession, dividend-focused, top-rated names are.

My Safe Money Report subscribers are already racking up solid single-digit and double-digit gains on many such stocks. Now, I want to cover a NEW way to generate “defensive” profits — one I discussed with them in my just-published September issue (which you can get your hands on by clicking here).

Buying DEFENSE sector stocks.

Look, I wish we lived in a completely peaceful, threat-free world. But as a market analyst, I have to base my recommendations on the world we have, not the one we may want. And the events of this past weekend prove we’re facing a very dangerous, unstable geopolitical environment.

As you probably know, Houthi rebels backed by Iran, other Iranian proxy forces, or Iran itself likely attacked key energy facilities in Saudi Arabia. The assailants used drones and missiles to strike the large Hijra Khurais oil field and the Abqaiq crude oil stabilization facility, the biggest such plant in the world.

Around 5.7 million barrels per day of production were knocked offline. That’s half of Saudi production. It could be anywhere from a few weeks to a few months before the Saudis can get production fully online again, according to various reports.

Oil traders reacted immediately to the news, sending benchmark Brent crude prices soaring by around 15% on Monday. That was the biggest one-day spike in more than three decades.

If there’s a saving grace here, it’s that the U.S. is a much larger energy producer now than it was years ago. That means oil and gas prices shouldn’t rise — or stay — as high as they did during past oil spikes like we saw in Gulf War I and the Arab Oil Embargo.

But that’s about the only good news in the region. The Saudis remain engaged in a low-grade war with the Houthis in Yemen. The Israelis are trading barbs with Iran and its regional proxies seemingly every week. And the possibility of some kind of U.S./Saudi retaliatory counterstrike remains high.

It goes without saying that we’re clearly in a new Cold War-style standoff with China, too. Tensions have also been increasing between us and Russia in light of that country’s moves over the past few years in eastern Europe.

The bottom-line impact of all of this? We’re likely to see an even-higher level of domestic defense spending. We can also expect increased purchases of both offensive and defensive systems by foreign allies.

U.S. defense contractors will be the primary beneficiaries. And just like demand for things like electricity and household products, that demand is NOT dependent on how weak or strong the economy is. That’s important in light of my expectation the economy faces a potential 2020 recession.

So, what can you do as an investor to position yourself for these developments? Well, there are a handful of ETFs that own a swath of defense sector stocks. They include the iShares U.S. Aerospace & Defense ETF (ITA, Rated “C+”) and the Invesco Aerospace & Defense ETF (PPA, Rated “C+”). Both are handily beating the market in 2019, with year-to-date gains of 33% and 40%.

But I zeroed in on one defense contractor in my September issue that looks particularly promising …

Second-quarter sales at this company rose 8% year-over-year to $14.4 billion, with all four operating segments (aeronautics, rotary and mission systems, missiles and fire control, and space) showing respectable gains.

Meanwhile, operating profit jumped almost 12%. And the company raised its outlook for 2019 revenue, earnings, and cash flow.

It was only coincidence that my subscribers had a chance to buy its shares right before the Saudi attacks. They’re already showing small gains as a result. But if my read of the geopolitical and market environment is correct, that should be just the start.

Again, you can get details on that recommendation and many others by clicking here. Or to get a broader perspective on my successful, defensive investing strategies, join me at one or more of the investor events I’m participating in between now and year-end.

The first conference is the MoneyShow Philadelphia, which runs from Sept. 26 to Sept. 28 at the Philadelphia 201 Hotel. You can click here to view my event schedule and register for free.

Next up is the MoneyShow Dallas, running from Oct. 13 to Oct. 14 at the Hyatt Regency Dallas. General information, details about my schedule, and registration information can be found here.

After that, I’ll be joining scores of metals, mining and market experts at the New Orleans Investment Conference. It runs from Nov. 1 to Nov. 4 at the Hilton New Orleans Riverside hotel. You can find more details on schedule, pricing and venue by clicking here.

Finally, I’m participating in the 2019 Money, Metals & Mining Cruise. It runs from Dec. 6 to Dec. 14 aboard the Crystal Serenity, sailing from Fort Lauderdale to San Juan.

I’ll be joined by Gold Newsletter executive editor Brien Lundin, Sprott U.S. Holdings CEO Rick Rule and Mary Anne & Pamela Aden from the Aden Forecast on this extraordinary voyage. You can find complete details on the itinerary, ship, costs and more at this link.

I hope to see you in person at one or more of these events soon! And I urge you to structure your portfolio in a more defensive fashion if you haven’t already, given both rising geopolitical and economic risks.

Until next time,

Mike Larson

About the Income & Dividend Analyst

In an era of high-risk exuberance, Mike Larson stands out as a leader in conservative investment strategies that outperform the market overall. Using the safety-oriented Weiss Ratings as a guide, he has a proven history of guiding investors to stocks and ETFs that provide asset protection, consistent dividends and excellent growth.

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