War Chest

Ranking the aerospace/defense universe by 3-month price momentum (relative strength), the four strongest names are now RTX (+26.7%), LMT (+15.5%), GD (+13.2%), and AVAV (+11.0%). RTX has been on a tear thanks to strong demand across its Raytheon defense and Collins/Pratt aerospace units, and its own 3-month return more than doubled since our last review. Lockheed Martin just posted a big earnings beat with a record $230 billion backlog and raised full-year guidance, which analysts say is fueling a sustained rally. General Dynamics continues to grind higher steadily on solid fundamentals, so it stays in the portfolio. AeroVironment (a smaller, faster-growing drone/counter-drone innovator) has surged recently on news it's set to win a roughly $400 million Army contract for its Locust anti-drone laser system, pushing its 3-month momentum past both Boeing and Rocket Lab. Boeing (+1.5% over 3 months) and Rocket Lab (+5.4% over 3 months) have fallen out of the top four, so we are exiting both. This swap keeps the portfolio equally split across four names -- two large 'prime' contractors (RTX, LMT) alongside GD, and one smaller innovative player (AVAV) -- consistent with the strategy's mandate to mix primes and innovators while always holding the strongest recent performers.

Starting from an all-cash portfolio, I ranked the 10 aerospace/defense names by 3-month price momentum (relative strength), which is the core signal in this strategy. The top 4 were Rocket Lab (RKLB, +23.3%), Boeing (BA, +9.1%), General Dynamics (GD, +7.6%), and RTX (+1.7%) — while Lockheed, Northrop, L3Harris, HII, Kratos, and AVAV all posted negative 3-month returns and were excluded. This mix nicely blends a smaller, high-growth space innovator (Rocket Lab, riding an $8B Iridium acquisition announcement and NASA launch wins, though it has pulled back sharply this week on profit-taking) with three large-cap primes: Boeing (benefiting from higher 737 MAX production rates and strong Q2 delivery numbers), General Dynamics, and RTX (both showing steady defense-driven strength). Each of the four is bought to an equal 25% weight, fully deploying the cash while respecting the 30% max-position cap and long-only/no-leverage constraints.