Don’t miss what’s happening with drone makers… the power of the parabola… nine trade ideas from Jonathan Rose… huge one-year returns… why Louis Navellier is joining Keith Kaplan next Tuesday
Drone maker stocks are surging.
Take Kratos Defense & Security Solutions (KTOS). It’s up 40% over the last month, and 80% over the last six months.
Drones are being used extensively in the Russia-Ukraine war by both sides. They’re playing a significant role in surveillance, targeting, and even conducting strikes. Meanwhile, both Israel and Iran launched large-scale drone attacks in their recent conflict.
Stepping back, the world is growing more unstable, defense spending is growing, and much of it is flowing toward drones.
Here’s The Washington Times from this afternoon:
Defense Secretary Pete Hegseth is fully on board. He announced a major drone initiative earlier this month, declaring that “drones are the biggest battlefield innovation in a generation.”
Meanwhile, in June, NATO members agreed to spend 5% of their respective GDPs on defense and security by 2035. And much of this spending will go directly to drone technology.
Here’s The New York Times with one example:
The British Defense Ministry announced this month a startling overhaul of its warfighting approach, moving away from the Cold War-era focus on heavy armor and mechanized infantry.
Under the plan, 80 percent of combat capability will rely on remote-controlled, reusable ground vehicles and drones as well as missiles, shells and self-destructing drones.
Now, in a moment, I’ll tell you how to get a list of nine potential drone trades (for free). But first, let’s look at how gains in drone stocks are starting to mean major returns.
The power of getting in early
Luke Lango has held KTOS in his Breakout Trader portfolio since May of 2023.
For newer Digest readers, Breakout Trader is a momentum trading service that focuses on trading stocks only in Stage 2, which represents the upswing of a trading cycle (before Stage 3 – a topping pattern, followed by Stage 4 – a decline, and then Stage 1 – a basing pattern).
In Tuesday’s issue, Luke highlighted a key principle of momentum trading – how returns can accelerate rapidly as gains begin to compound:
Last week, KTOS surged another 16%, taking our total trade return (on this open position) to 250% (officially 249.79% at yesterday’s close). A huge “congratulations” to you…
This is when gains can really snowball.
Case in point, just three weeks ago, in our June 24th issue, our KTOS return was 202.51%.
Since then, KTOS has jumped 19%, but that has translated into our overall trade return climbing almost 50% to the 250% figure I just highlighted.
Let me update this…
In the three days since Luke’s update, KTOS has climbed another 15.8% (as of Friday morning as I write); meanwhile, the official Breakout Trader return has jumped from 250% to 301%.
This kind of compounding effect is what gives big winners their parabolic shape on stock charts.
Luke concluded his KTOS analysis with, “Welcome to 250% – but don’t get comfortable. If this pace holds, we’ll be at 300%+ before the end of the month.”
It appears “by the end of the week” was more accurate.
Another drone maker that could be in the early stages of its own parabolic move
Palladyne AI (PDYN) develops autonomous drone software that enhances the capabilities of existing drone platforms for military and defense applications.
It’s also in the Breakout Trader portfolio and has surged 48% since last Thursday.
Yesterday, Luke suggested subscribers lock in roughly 60% returns on a portion of their trade:
PDYN stock surged sharply today despite no material news, propelling our position up roughly 60%. But momentum alone doesn’t sustain valuations. The stock’s Relative Strength Index (RSI) now signals that it is overbought…
Locking in partial profits on PDYN at current levels is a disciplined way to benefit from short-term momentum while preserving upside potential over the next several quarters.
To make sure we’re all on the same page, when an RSI chart climbs above “70,” that signals an “overbought” move. This means the stock’s price has likely risen too quickly and may be due for a pullback or correction.
Given this, if you want to initiate a trade on PDYN, wait until its RSI pulls back, consolidates, then begins a new climb – which appears is happening as I write (the stock is down about 3%).
Circling back to KTOS, based on its own elevated RSI, our recommendation is the same. As I write, KTOS’s RSI clocks in at 81. Translation – red hot.
So, the safe play is to watch these trades from the sidelines until they regroup, and their technical levels normalize.
But if you want to play drones, these are two of the hottest stocks out there.
Want even more drone trade ideas? Veteran trader Jonathan Rose has you covered
In the Tuesday 7/8 episode of Masters in Trading Live, Jonathan delved into the “Drone Revolution,” detailing nine different drone companies.
If you’re considering drones today, it’s a must-watch since Jonthan provides all sorts of helpful, actionable information. Best of all, it’s free!
And as a reminder, you can join Jonathan for his free Masters in Trading Live broadcasts at 11:00 a.m. Eastern time every day the market is open. They’re a fantastic way to learn more about trading, while also giving you the tools to put a wad of cash in your pocket.
Speaking of a wad of cash…
Though the major indexes are at all-time highs, we’re mostly flat here in July.
However, under the surface, plenty of individual stocks are exploding higher – a continuation of their multi-month surges.
I’m on a group email chain with several InvestorPlace analysts and researchers. In recent days, I’ve seen a flurry of emails come through highlighting some massive winners. The stocks below include a few from the email chain.
Since we began today’s Digest highlighting Luke’s win with KTOS, I’ll profile a few other Luke picks from his various portfolios:
- Nuscale Power Corp. (SMR): 278% one-year return
- AST SpaceMobile (AST): 353% one-year return
- Palantir (PLTR): 433% one-year return
- Rocket Lab (RKLB): 840% one-year return
More recently, look at Coinbase (COIN), which Luke holds in his Innovation Investor portfolio.
From its Liberation Day low, COIN has surged 186%.
Bottom line: This market has no shortage of wealth-building stocks. We hope you’re enjoying them in your own portfolio.
If not, here’s something to consider…
The power of combining fundamental and seasonal strength
This week in the Digest, we’ve profiled the seasonality trading tool from our corporate partner, TradeSmith. It identifies the exact days to buy and sell a stock based on its unique, historical patterns.
Here’s TradeSmith’s CEO Keith Kaplan with a brief overview:
It runs 50,000 tests a day to analyze every stock in the major indexes and zero in on the ones with the strongest seasonality trends…
Some stocks trade so consistently—rising or falling during specific windows, year after year—that you can map out a year’s worth of great trades.
Next Tuesday at 10 a.m. Eastern, Keith is holding a webinar where he’ll walk through the seasonality tool, and show attendees the best way to use it.
We’ve noted that when you sign up to attend the webinar, you’ll get access to the seasonality tool immediately so that you can test drive it for yourself.
In yesterday’s Digest, I mentioned that legendary investor Louis Navellier will join Keith next Tuesday
Louis is one of the most respected “quant” investors in our industry – and his been for decades.
Here’s Louis explaining why he’s joining Keith on Tuesday:
Over the years, my data-driven approach has pinpointed 18 recommendations that returned 10,000%… and 675 others that doubled.
My system has made a lot of people a lot of money. And it’s stood the test of time.
But while working with fintech company TradeSmith, I came across something that sharpens it even further.
Think my best picks—on steroids.
We profiled this in yesterday’s Digest – the combination of Louis’ fundamentals-focused stock selection strategy and Keith’s seasonal/technical strategy.
Back to Louis:
My Stock Grader system ranks stocks based on their growth potential.
But my system lights up hundreds of stocks a year as potential buys. How do I know which have the greatest profit potential?
That’s where this new system comes in.
Certain stocks have a history of going up on specific calendar dates—year after year. By buying on seasonally favorable “Green Days,” you increase the odds of success when you’re buying socks.
We’re running long today, so I’ll wind us down. But next Tuesday, Louis and Keith will dive into far greater details about their respective quantitative systems, “green days,” and what these two experts see coming for the market.
On that note, I’ll add that Keith’s seasonality tool suggests we’re in the final stretch of a bullish time of year (helping drive those gains I profiled above). But we’re about to run into seasonal headwinds, so stock selection and timing becomes even more important.
To get a sense for what that could mean for the specific stocks in your portfolio, click here now to register for next Tuesday’s event, then plug your holdings into the seasonality tool.
In any case, we’re in a hot market. Let’s capitalize while we can.
Have a good evening,
Jeff Remsburg
