As tensions rise in the Middle East, consider shares in the Powershares
Aerospace And Defense ETF (NYSE: PPA).
Chart Courtesy of StockCharts.com
It's fairly clear that tensions will rise in the Middle East
and Asia this year. Whether the tensions progress to an extension
of the already existing conflict there is the real question for
citizens and investors alike.
The reports of instability in Iran, suicide bombings in Pakistan, and ongoing
hostilities in Afghanistan are well known. Yet, the expansion of the war on terror
into Yemen suggests that the fronts are expanding and that U.S. involvement in
that general region of the world is not likely to end anytime soon, despite political
talk of it continuing.
Thus defense companies, who depend on government money for their living are in
a good position to continue to make money. To be sure, this is a sensitive area
for investors. And our role here is not to condemn or condone war or the defense
industry. It's just a fact of life that there is a huge long term conflict under
way and that defense companies are in a good position to profit from it.
Investors that use PPA can own the entire sector with one click of the mouse.
And that makes sense, given the vagaries of the sector and the fact that politics
are the key to the sector's profits.
PPA had a nice move, rising 70% from its March bottom in 2009. The ETF has remained
in an intermediate term up trend since then with the 50-day moving average providing
support along the way.
To us, it looks as if this sector will likely continue to prosper over the long
term. This ETF could, however, pull back along with the market at any time. That
means that patient investors could time their entry for long term holding periods
during the inevitable corrections along the way.
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