IShares Aero & Def. ETF (ITA)

ITA has been on the verge of a technical breakout since February with resistance at $116-117. It failed seven times, hasn't moved up. So, he sold it.

Good option for hawkish investors.
Low weighting in portfolio smart idea given nature of ETF.
If conflict persists in Europe - a good option.

Boeing is the second-largest holding in this ETF. Today's announcement won't have a major impact. Use this dip to buy or enter. They just announced production delays.

It is made up of biggest US defence contractors. Defence spending will continue to be a big thing, particularly under the Trump regime. Has come down significantly the last few weeks and is a good buying opportunity.

(A Top Pick September 12/17 Up 25%) He still likes this ETF. It has technically shown another bullish breakout and he is considering re-entering this again soon. Increased foreign spending on security will continue to make this a winner.

ITA-N vs. XAR-N He knows the defence sector. A problem in defence is the huge run-up in Boeing, which dominates defence. ITA has a cap system in place to deal with this over-concentration in a few defence stocks, but XAR is odd because it's equal-weighted, therefore carries more risk. He prefers ITA.

Defence is expensive. This ETF is aerospace and defence. If you want to be more precise, Raytheon (RTN-N) is a good way, which is focused on cyber defence, missile defence, has the most international sales exposure. He likes the theme of defence spending. You take out some of the idiosyncratic risks by buying this one.

Aerospace defense is doing well and terrorism is not going away. That is going to keep these stocks doing very well. Wait for a pull back. He does not buy a stock on a day it is up.

Seasonally you normally see defence stocks doing very well from about October right through until about the end of the year, and then they tend to take a bit of a break from January through to March. They then take another move to the upside until May. Technically, it is currently running into some overhead resistance with a small downward trend.

This has always been a thematic type of investment. There are times you want to own, and there are times when you don’t. The 5-year chart shows it is really on the highs and breaking out a little. He doesn’t like breakout kinds of stories because they fail more often than they don’t. Also, it depends on who wins the election. If Trump wins, this might be a very strong sector for a little while.

The period of seasonal strength for this sector is from mid-October right through until early January, and also from March until May of each year. Today there were a number of stocks within the sector that broke to new highs. This is happening because there are terrorist activities going on, which means there is going to be more military equipment that is purchased by all the major countries globally, who want to fight against ISIS.