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Larry Berman CFA, CMT, CTA IShares Aero & Def. ETF ITA-N DON'T BUY Jun 20, 2016

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.

Larry Berman CFA, CMT, CTA

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COMMENT

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.

PAST TOP PICK

(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.

TOP PICK

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.

BUY

A good option to mitigate risk in individual companies is to buy a basket. He does this for mining, health care and would do it for the defence and aerospace industry too.

DON'T BUY

Trump, if he wins, he will spend more on military while Biden will probably take money away from it. The question is, which will win? He thinks Biden will win. The sector probably has some downside risk. China just came out with sanctions against the US and some companies in this fund for sale of military equipment to Taiwan. He would hold off.

BUY ON WEAKNESS

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.

HOLD

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

SELL

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.

BUY

ETF for defense and/or aerospace.

Exposure to some of the biggest names. A lot of defense contractors, performed well with everything going on out there in the world. The only name in there that he's not wild about is BA, it's had trouble.

BUY

This holds a lot of GE, Raytheon and Boeing. Likes the defence space. It's timely.

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