A Surprising (and Potentially Profitable) Way to Support the Troops

by Andrew Zatlin

Last week, the consensus from the “experts” was a lackluster payroll number.

But I had a different perspective.

And as it turns out, I was right on the money. (Not to brag, but that might help explain why I’m Bloomberg’s No. 1 economic forecaster.)

Curious what my crystal ball is telling me will happen next? Read on…

For a transcript of this video, see below. This transcript has been lightly edited for length and clarity.

A Surprising (and Potentially Profitable) Way to Support the Troops

A funny thing happened last Friday:

A strong payroll number came out — just as I’d predicted. But the stock market didn’t pull back.

I’ll keep an eye on things this week, because I’m forecasting a drop in the near future.

In the meantime, let me tell you about a sector where I’m seeing nothing but promise.

Sales Are on the Rise

An investment in military and defense stocks is about as bullish as you can get. After all, demand keeps growing.

  • In 2021, direct sales of U.S. military equipment came in at $105 billion.
  • In 2022, that figure jumped almost 50% to $154 billion.
  • And last year, sales reached $238 billion.

Around the world, we’ve got conflicts in Ukraine, China, and the Middle East. So it stands to reason that sales are climbing. The question is, will they keep climbing?

A Surprising Nation Steps Up

You bet. And that’s thanks to a rising superpower in Asia.

You see, the U.S. is the No. 1 arms exporter in the world. And Russia is No. 2.

But Russia’s ability to compete with America is dependent upon sales to India. One-third of Russia’s arms are sold to India — at least, for a little while longer.

In the past, the U.S. didn’t want to sell arms to India because the country was playing games, and it wanted to buy from the U.S. and Russia. America also expressed concerns that India would even turn around and sell American-made weapons to Russia.

But the tide is turning. Last March, India signed a deal to purchase $8 billion worth of U.S. equipment. Just a few weeks ago, it signed a $4 billion deal for even more weapons. That’s $12 billion that American companies are getting, and Russian companies aren’t.

The thing is, the recent deals with India aren’t all about the money.

There’s something else going on here…

Strategic Partnerships Abound

The U.S. now views India as a strategic partner.

Amidst the conflict in Israel and elsewhere in the Middle East, the Indian Navy has been stepping up its involvement, taking action in Yemen and off the coast of Somalia, where pirates are a major problem.

The U.S. is appreciative of India’s defensive moves, so it’s providing the country with the weapons and equipment it needs to keep up its strength.

Not far from India, though, another nation is purchasing more U.S.-made hardware. I’m referring to Japan.

Japan spends about $34 billion a year on U.S. military equipment. Now it’s doubling that spending to $68 billion.

In case it’s not obvious, this is all great news for U.S. military and defense companies. As demand for their arms continues to rise, sales, earnings, and eventually stock prices, should rise, too.

Ready to invest in this sector? Here are my thoughts…

Don’t Follow the Crowds

A popular play here might be to go after some of the big names — Northrop Grumman (NOC), Lockheed Martin (LMT), or Raytheon (RTX). And those are all solid investments.

But I’m a supply-chain guy. I like to look deeper at secondary companies that provide the essential parts and materials needed to create weapons and equipment.

That’s why I’d look at Jabil (JBL), a technology company that contracts a lot of work for defense-contractor General Dynamics (GD).

I’d also look at shares of AAR Corp (AIR), an aviation company that signed a 15-year, $909 million contract in 2017 to provide supply-chain management to the U.S. Air Force.

AIR has some political ties to Donald Trump, and its stock could jump considerably if Trump is elected in November.

In it to win it,

Moneyball Economics