Syria Crisis Means Defense Opportunities

Tony Sagami

Over here in the "Far" East, I've watched the Middle East right along with you these last few weeks. The Syria crisis affects everyone ... even during this quiet time when plans for a military strike are on hold while diplomats try to reach an agreement.

Will Syria really hand over all of its chemical weapons to some kind of international control? Call me skeptical, but I think the idea that Syrian leader Bashar al-Assad will actually comply is an insult to common sense.

Even if he does surrender his chemical weapons, nothing is stopping him from killing his own people with conventional weapons.

I think there is a high probability the military option will resurface. No matter where you stand on the "should-we-or-shouldn't-we" debate, you should know any U.S. military action would have a serious impact on the rest of the region.

Iran already threatened to launch a massive missile strike against Israel if the United States attacks Syria. Hossein Shariatmadari, the editor of the main Iranian newspaper, warned that ...

"The day of reckoning is near," he said, adding that any attack on Syria would "provide the long-awaited opportunity for revenge against Israel and America."

Shariatmadari went on to call Israel the "Achilles' heel of America and its European allies ... thousands of missiles will rain down all over the occupied lands [Israel], which will destroy its critical facilities as it was obvious that its missile defense system could not prevent missiles reaching Tel Aviv.

"Muslims should welcome the news of an attack on Syria as it will provide the long-awaited opportunity for revenge, which should destroy the enemies of Islam."

This is strong language. If Iran does attack, I think Israel would fight back, possibly launching an all-out military offensive on Iran.

Egypt and Iraq on the Edge, Too!

Syria isn't the region's only powder keg.

Last week, while the world had its eyes on Syria, Egypt's army launched what it calls the "largest military campaign against the terrorists in the northern Sinai Peninsula."

The Egyptian generals vow to keep fighting until the country is "fully cleansed."

In northern Iraq, military clashes are almost a daily ritual in an area called the "Triangle of Death."

This year's death toll is already up to 4,000 people killed.

Of course, none of us knows how this will end -- but I am very sure it won't be good.

If you agree, you might consider buying defense stocks. U.S. military and defense suppliers are the world's best. These two sector ETFs are an easy way to invest in them:

  • PowerShares Aerospace & Defense Portfolio (PPA)
  • iShares Dow Jones U.S. Aerospace & Defense Index Fund (ITA)

You'll note a price difference, with PPA trading in the $27 range and ITA trading just above $91, but both funds have substantially similar holdings.

Each includes companies such as United Technologies (UTX), Boeing (BA), Lockheed Martin (LMT), General Dynamics (GD), Raytheon (RTN), Precision Castparts (PCP), Northrop Grumman (NOC) and Rockwell Collins (COL).

Dozens of specialty defense stocks also benefit from military spending. Here are a few interesting names:

  • GenCorp (GY) is a pioneer in propulsion system technologies used in missiles, maneuvering systems, spacecraft and satellites.
  • Elbit Systems (ESLT) supplies electronics for the F-15 and F-16 fighters, the Comanche helicopter, the Bradley Fighting Vehicle and other military vehicles.
  • Force Protection (FRPT) builds armored vehicles that shield occupants from landmines, hostile fire, and improvised explosive devices (IEDs).

Another company to consider is Ceradyne, which makes specialty ceramics with industrial, commercial and automotive applications -- and also lightweight body armor and helmets. 3M (MMM) bought the company late last year, so that's how to gain access to this powerful defense player.

Now, I am not suggesting that you rush out and buy any of these ETFs or stocks tomorrow morning. As always, timing is everything so you should wait for them to go on sale before you buy.

Always do your own homework and make sure that any investments I mention are appropriate for your personal financial goals and risk tolerance.

Unfortunately, the world is becoming more hostile -- but there are big profits making in the world safer, too.

Best wishes,
Tony

P.S. One of the best trades I've seen all year ... one that's been paying out like an ATM over the past six years ... is oil.

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Posted 09-20-2013 1:21 PM by Tony Sagami
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