Opportunity and Risk in the Aerospace and Defense Sector

Scott Sacknoff (SPADE Investor) submits: Although headwinds still exist (which should be resolved somewhat with the approval of the FY-2011 budget and release of the FY-2012 next week) the aerospace and defense sector has been showing significant strength over recent months.

By Scott Sacknoff (SPADE Investor): I could spend this month’s commentary talking about technical trends, resistance levels, fundamentals, etc. but the reality is, that would be a waste of time -- yours and mine.

By Vince Martin:Defense stocks have rallied over the past two weeks, buoyed by the strength in the broad market. The Spade Defense Index is now re-testing near term highs not seen since the late-summer stock market collapse [click to enlarge]: 1-year chart of Spade Defense Index, courtesy marketwatch.com

By Scott Sacknoff (SPADE Investor): The news that the two largest European defense companies (BAE, based and listed in the United Kingdom and EADS, based and listed in France and Germany) were discussing a merger caught the sector by surprise. At first glance, the creation of a behemoth with $90 billion in sales is intriguing. The firm's cores are, for the most part, complimentary.

Tom Lydon submits: The outlook for aerospace and defense sector exchange traded funds is weak due to supply-side problems that will likely emerge in coming years, according to a recent report.

By John Kozey: Investors are pushing sector rotation toward more cyclical sectors and the former defensive leaders are lagging. Industrials are underperforming, with the aerospace and defense industry outgunning both the sector average and also the S&P 500 in total return year to date.

Kevin Grewal submits: The results of the recent mid-term elections, putting Republicans in control of the U.S.