Recently, the geopolitical situation has started to heat up again, and the topic of war-related stocks has also become popular. I’ve been paying attention to this sector lately and thought I’d organize my insights for everyone’s reference.

Honestly, besides the US-Iran conflict, Japan has significantly increased its military spending, and Japanese retail investors are heavily investing in defense stocks through NISA accounts. This wave is indeed a bit different. Tech stocks are currently not very profitable, so defense, energy, and mining stocks have become the mainstream choices.

My approach is relatively conservative. At the beginning of the month, I directly allocated funds into U.S. PPA ETFs, a basket of stocks that’s convenient and helps diversify risk. The defense industry is quite complex, covering AI, drones, aerospace, and possibly robots in the future, so I prefer using ETFs to manage exposure. However, if you want to play individual stocks, the returns can be higher, but the volatility is also greater. It depends on your personal risk tolerance.

Regarding key targets within war-related stocks, I think these are worth paying attention to: RTX Raytheon mainly makes missile systems and is a veteran player in this field. LMT Lockheed Martin produces fighter jets and missiles; their F-35 fighter jet is a flagship product with a stable market share. GE Aerospace specializes in aircraft engines, almost monopolizing this market, and aircraft maintenance is very profitable. Also, Kratos Defense & Security Solutions focuses on low-cost drones; new companies can be volatile but also have great potential.

In this environment this year, war-related stocks are indeed a worthwhile allocation. My strategy is to combine gold and silver with defense stocks, providing both hedging and growth potential. Those interested can start with ETFs to get familiar with this sector, and then consider individual stocks later.