Magnifi Communities

As we approach the one-year anniversary of the start of the Russian-Ukraine war, we are seeing more evidence that a significant boom is continuing in the defense industry.
I know what you may be thinking… the rally in defense stocks has already occurred, and the time to buy these stocks was at the start of the war in Ukraine.
While that would have been the ideal time to buy defense stocks, just because you didn’t buy back then doesn’t mean now is also not a good time to buy.
Let me explain why now is an excellent time to buy defense stocks, or better yet, Exchange Traded Funds that focus on defense stocks, and then I will give you a few different defense ETFs that you can buy today.

The Foundation for Defense of Democracies Center on Military and Political Power recently estimated that the total spending required by United States NATO allies could be as high as $21.7 billion to replace military equipment given to Ukraine to fight the war with Russia.
That number could be higher or lower based on how different countries decide to replace arms that were given to Ukraine, but the point is if NATO member countries want to build their own militaries back up to meet the level they were before the Russian-Ukraine war began, a lot of money will need to be spent, to get them back to par.
Furthermore, based on the situation in Ukraine, many believe that we will not only see countries replenish their weapons stockpiles but increase what they have in reserve.
Additionally, we are seeing more countries apply for acceptance into NATO since the Russian invasion of Ukraine. As we see NATO increase in size, it is likely that the alliance will also increase its own arms stockpile.
Ideally, the Russian-Ukraine war will end soon, and this conflict will be a short-term catalyst for defense spending.
But even if you are on the fence about the defense industry in the short term, the long-term prospects of the industry still look good.
Besides a slight year-over-year dip in spending in 2012, worldwide military spending has nearly doubled since the late 1990s, going from just over $1.1 trillion to $2.1 trillion in 2021.
More so than other industries, the defense industry is one in which cherry-picking individual stocks is challenging. The best way to play the never-ending spending in this field is with exchange-traded funds that own a basket of companies operating in the space.
Let’s take a look at a few ETFs that will give you good exposure to the industry.
To start, we have the largest, based on assets under management, defense-focused ETF, the iShares U.S. Aerospace & Defense ETF (ITA).
ITA has $4.95 billion under management, an expense ratio of 0.39%, and a yield of 0.97%. The fund currently holds 37 positions, with the top ten holdings representing 72% of the fund.
More so, Raytheon Technologies (RTX) makes up more than 21% of the ETF. Over the past three months, ITA is up 9.98% but down 2.24% year-to-date. Over a longer term, the fund is down 0.95% over the last three years; however, it is up 13.28% annually over the previous ten years.
The Invesco Aerospace & Defense ETF (PPA) is an ETF that is slightly less top-heavy but still gives you similar exposure.
PPA has 55 holdings, with the top ten representing 53% of the fund and Boeing (BA) holding the top spot with 7.65% of assets. Raytheon holds the second spot with 7.05% of the ETFs assets. PPA also pays an 0.84% yield and has an expense ratio of 0.61% while having $1.71 billion in assets.
Two other defense ETF options are the SPDR S&P Kensho Future Security ETF (FITE) and the SPDR S&P Aerospace & Defense ETF (XAR).
These are both ETFs that have some companies that operate directly in the defense sector, but they also hold a large number of companies that operate in defense-related industries but are not directly related to weapons manufacturing.
For example, XAR holds a lot of space-related stocks, such as Virgin Galactic (SPCE). In contrast, FITE holds several companies that operate in the communications industry, like Iridium Communications (IRDM) and Broadcom Inc (AVGO).
One other option to look at if you are incredibly bullish on the defense industry is the Direxion Daily Aerospace & Defense Bull 3X Shares ETF (DFEN).

DFEN is a three-times leveraged bullish ETF that will give you maximum exposure to the upside if defense stocks rally in the near future. However, due to the nature of this ETF, it should only be held for short periods, or contango will eat away at any gains you realize from owning it.
DFEN has an expense ratio of 0.96% with $181 million in assets. It is up more than 25% over the last three months but down more than 7% year-to-date.
The biggest issue with investing in defense-focused ETFs is that none of the current options are focused solely on defense stocks. They all hold a combination of defense and aerospace companies, which usually move together but may not give you absolute defense stock exposure.
Matt ThalmanINO.com ContributorFollow me on Twitter @mthalman5513
Disclosure: As of this writing, Matt Thalman owned Iridium Communications. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

While 2022 was a year to forget for the major market averages, the Gold Miners Index (GDX) managed to claw its way back from significant underperformance to finish the year down just 10%, outperforming the S&P 500 (SPY) by 1000 basis points.
Fortunately for investors in the gold space, we’ve seen follow-through to this outperformance to start the new year, with the GDX up 13% year-to-date and back into positive territory on a 1-year trailing basis.
However, while the index may be up sharply off its lows and gold miners are outperforming most stocks, this doesn’t mean that any miner can be bought on dips, and a few have become expensive and increasingly risky now that they’re up more than 50% off their Q3 2022 lows.
In this update, we’ll look at two names that continue to fire on all cylinders and are much safer ways to buy any upcoming pullbacks in the space, given their operational excellence, attractive dividend yields, and superior diversification vs. their peer group.

Let’s take a closer look below:
Agnico Eagle Mines (AEM)
Agnico Eagle Mines (AEM) is the world’s third-largest gold producer and has been one of the busiest companies in the sector from an M&A standpoint.
In Q1 2022, the company closed its merger with the 9th largest gold producer globally, Kirkland Lake Gold, and is now in the process of acquiring Yamana Gold’s Canadian assets in a two-way acquisition with Pan American Silver (PAAS).
The result of these two acquisitions is that the company will grow into a ~3.9 million-ounce producer by 2024 (assuming the Yamana deal closes), placing it just behind Barrick Gold (GOLD) for the #2 spot among the world’s largest gold miners.
The result of this M&A activity is that Agnico Eagle now has ten mines in the safest mining jurisdictions globally (up from seven previously) and will gain the other 50% ownership of one of its largest gold mines in Quebec if the Yamana deal closes.
Plus, while Agnico Eagle may not be the largest gold producer, it is one of the top-6 lowest cost gold producers globally with all-in-sustaining costs below $1,000/oz and has one of the best pipelines in the sector, sitting on multiple world-class assets with some able to leverage off existing infrastructure, resulting in lower capital expenditures and benefit from synergies.
One example is Upper Beaver in Ontario, which sits in the same camp as its newly acquired Macassa Mine, a gold-copper project that could enjoy industry-leading margins due to by-product credits.
Another is its recently acquired Wasamac Project, a high-grade underground project in the Abitibi Region of Quebec that could potentially provide ore feed for mills in the region with excess capacity.
Finally, while the San Nicolas Project that it partnered on with Teck may not have clear synergies, this is one of the highest-margin VMS deposits globally, and it should enjoy 60% plus margins at current commodity prices.
Given Agnico Eagle’s unique position with multiple assets in safe jurisdictions and a development pipeline that could allow the company to grow production to 5.0+ million ounces per annum without any further M&A, I see the stock as one of the best ways to get exposure to gold.
This is especially true given that few million-ounce producers offer meaningful growth, which is related to the fact that it’s harder to grow once miners reach a certain scale.
Plus, Agnico Eagle can be considered a “sleep well at night miner”, operating out of Canada, Finland, Australia, and Mexico – which are ranked the safest jurisdictions globally.
So, while I have no plans to add to my position here at $58.00, I would view any sharp pullbacks in the stock as buying opportunities.
Barrick Gold (GOLD)
Barrick Gold (GOLD) is the world’s second-largest gold producer and owns the most Tier-1 scale (500,000+ ounces of production per annum) among its peers, but the stock has seen lifeless share-price performance over the past decade.
This can be attributed to the company’s heavy debt under its previous management, evidenced by net debt of more than $10 billion during the 2011-2015 secular bear market for gold.
The weaker balance sheet forced the company to divest some assets at the worst possible time, and the unfavorable position of being leveraged in a secular bear market earned Barrick the title of being of the worst-performing gold producers.
However, following the merger of equals with Randgold in 2018, the company’s new CEO has done an incredible job turning the company around.
Not only does the company have a net cash position today, but it has an attractive dividend yield of more than 3.0% and is aggressively buying back shares, regularly buying back over 1 million shares per week in Q3 and Q4.
Meanwhile, from an operational standpoint, its new CEO Mark Bristow has turned around several of its operations.
One major example is the agreed-upon joint venture in Nevada to take the borders off its operations and allow for synergies to make both its operations and Newmont’s operations much leaner.
Unfortunately, we haven’t seen the fruits of this hard work from a headline standpoint, given that Barrick’s production has declined since 2019, and its costs have risen sharply due to inflationary pressures.
Fortunately, this will change in 2023, with production hitting a major trough in 2022 at 4.14 million ounces but with growth to ~5.0+ million ounces by the end of the decade.
This growth will come from multiple assets, and costs are expected to drop by more than $200/oz in the same period as we see several assets optimized and lower-cost assets come online.
The result is that Barrick is finally investable and trades at a reasonable price, given that the stock remains stuck in a multi-decade downtrend.

Based on what I believe to be a fair cash flow multiple of 10.0 and FY2023 cash flow per share estimates of $2.35, I see a fair value for Barrick of $23.50, pointing to an 18% upside from current levels.
However, this assumes that we don’t see further strength in copper and gold prices, which could push its price target closer to $25.00.
At a current share of $19.80, this doesn’t translate to enough margin to rush into the stock just yet, given that I prefer a minimum 25% discount to fair value. However, if we were to see GOLD pullback below $17.70, I would view this as a buying opportunity.
Although Agnico Eagle Mines and Barrick Gold are two best-of-breed names in the sector, I have never seen much value in chasing rallies, so I have no plans to add to my positions in either stock here, given that they’ve had a nice run.
However, if we saw a sharp pullback in these names to unwind their current overbought conditions, I would view this as a buying opportunity.
Hence, for investors looking for exposure to gold, I believe these are two liquid leaders with generous shareholders returns that should be at the top of one’s watchlist.
Disclosure: I am long GOLD, AEM
Taylor DartINO.com Contributor
Disclaimer: This article is the opinion of the contributor themselves. Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information in this writing. Given the volatility in the precious metals sector, position sizing is critical, so when buying small-cap precious metals stocks, position sizes should be limited to 5% or less of one’s portfolio.

While fights over Supreme Court and Federal Reserve Board nominations come sporadically as vacancies arise, there is one political battle we can almost always count on from year to year, and that is the struggle over extending the federal debt ceiling.
If it’s not increased, we’re told, the U.S. government will default on its obligations, Social Security and other government program beneficiaries will be rendered destitute, Treasury bondholders will see the value of their holdings decimated as they go without their interest payments, our soldiers and other government employees won’t get paid, and the global financial system will grind to a halt.
Most serious-minded adults, however (I hope), have learned to ignore this annual game of chicken that the White House and Congress insist on playing every year, although the financial press and media commentators profess to take it seriously.
Whichever political party controls the White House or the houses of Congress, the drama generally follows the same predictable format, namely the Democrats always favor raising the debt ceiling to avoid the catastrophes described in the first paragraph, while the Republicans express opposition in the name of fiscal responsibility.

Yet no matter how long the drama plays out, the outcome is always the same: the Republicans eventually knuckle under, life goes on and everyone gets their money, until the next debt debacle. Lather, rinse, repeat.
This year, it seems, the play has begun early.
Five whole months before the government allegedly runs out of money without a debt limit increase, Treasury Secretary (and former Fed Chair) Janet Yellen has already sounded the alarm and instructed her troops to put in place “extraordinary measures” to allow the government to keep paying its bills before it hits the current $31.4 trillion debt limit in June.
Yellen wasted no time in using the dreaded D-word to emphasize the supposed seriousness of the situation.
“A failure on the part of the United States to meet any obligation, whether it’s to debtholders, to members of our military or to Social Security recipients, is effectively a default,” she said. 
She also quickly dismissed suggestions that should the debt limit not be raised in a timely fashion the Treasury would be able to prioritize payments to recipients, be they bondholders, senior citizens or soldiers.
“The Treasury’s systems have all been built to pay all of our bills when they’re due and on time, and not to prioritize one form of spending over another,” she said last week.
I find that a little difficult to believe — every computer system in the world can be modified to accommodate some hiccup or another — but her comment went unchallenged.
One thing I’ve always found amusing about the whole annual debt limit-default drama is the market’s reaction to it, which is generally no reaction at all or the one you would least expect to happen, namely investors rushing to buy the very instrument that is supposedly being defaulted on, i.e., Treasury bonds.
If you knew a country or a corporation might default on their debt obligations, your first instinct would be to avoid them, wouldn’t it?
Yet, the closer we ostensibly get to a U.S. government default, the market reaction is to buy Treasuries, under the time-honored flight to safety.
That alone should tell you how seriously to take all this. No sensible person believes — or should believe — that the U.S. government is going to default, no matter how much scare talk comes out of Washington. Ain’t gonna happen.
But stay tuned. We’ll no doubt be hearing more about this as doomsday approaches. Try not to let it disturb your sleep or influence your financial decisions.
Meanwhile, we have a Fed meeting announcement to prepare for next Wednesday.
Compared to the Fed’s 2022 meetings — during which it raised interest rates seven times by a total of 425 basis points — next week’s meeting should be relatively uneventful and fairly predictable.

That is, we can probably expect the Fed to raise its federal funds target by another 50 bps, the same increase as the one at its previous meeting in mid-December following four straight 75 bp hikes. That would bring the fed funds rate to 4.75%, or close to where most people believe the Fed will end up.
Given the recent softening in the labor market and moderation in the inflation rate, it certainly could be argued that the Fed should reduce the increase to 25 bps, although that doesn’t seem likely to happen.
The Fed doesn’t want to send the message that it is losing its zeal to drive down inflation to its 2% target and giving in to just about everyone else clamoring for the Fed to at least pause its rate increases.
Even a 25 bp hike would be seen as the Fed giving into pressure, so a 50 bp increase seems the most likely outcome, whether warranted or not.
George YacikINO.com Contributor
Disclosure: This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.