Take a look at the long-term charts of most large-capitalization Aerospace & Defense stocks and you can see they have produced consistent gains for their shareholders.
This group has some of the best and most orderly uptrends in my opinion including LMT, NOC, RTN, GD, etc.
Lately, I have been intrigued by the price action of two small-capitalization names: AeroVironment Inc. (NASDAQ:AVAV) and Aerojet Rocketdyne Holdings (NYSE:AJRD). I feel these stocks are currently flying under the radar (pun intended).
Both stocks are seeing multi-year and multi-decade base breakouts with positive signs of demand. AVAV broke out of an 8-year base through the 2009 and 2014 highs on a powerful gap and large accumulation volume. AJRD broke out of a 30-year base seeing the largest accumulation volume come in over the past 5 years.
AeroVironment Inc. Stock Chart (AVAV)
Aerojet Rocketdyne Holdings Stock Chart (AJRD)
While these stocks may seem extended to certain investors, my argument is that if these breakouts continue, the trend is higher and price will follow. A favorite saying of mine “the bigger the base, the higher in space” is very applicable here. There has been a large opportunity cost of holding these two stocks over the long-term but that may have finally changed.
We have seen some slight market pressure this week and so far, both have held their ground. I look forward to seeing if this can continue. We can speculate that geopolitical reasons may be an attributable cause but at the end of the day these charts insinuate they want higher. Therefore I want to own them. Risk management wise, it is clear that we do not want to own them if the breakouts begin to roll over and reverse back towards/under the previous all-time highs.
Thanks for reading!
The author has a position in AVAV and AJRD at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.