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ARKX, Defense stocks and Apple

Updated: May 17


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RECAP OF LAST WEEK AND RESULTS:


Coinbase: Initially, it went on the stock exchange two weeks ago, and we called this to go down before it came running back upwards. We think it is currently in a buying range. This is heavily correlated with the Crypto currency market. If Bitcoin goes down it is likely, Coinbase will go down as well. However, Coinbase revenue comes from trading the currencies. So they make money when you buy and sell your Crypto. It is important to watch how active Crypto trading is on this stock.


Virgin Galactic: The stock price stayed around $22 last week, and is still under $25 a share. After Richard Branson disclosed a sale of a large stake of 9%, the stock dropped into a range that could make this a solid time to buy-in. We believe in a year or so it will move to the $40-60 range upon a successful test flight.


IN THIS ISSUE


ARKX & Defense Stocks

Pentagon to release information on UFOs before or on June 30th


Apple

Biden’s plan should not affect Apple and increased dividends to shareholders.

Ark Invest Space Exploration: ARKX


This stock is an ETF which is an investment firm that invests in the space industry. Their current listings are here. It is worth a visit to see some of the companies that they are holding. We want to mention some news that has been missed by most investors due to the timeline and offset of focus on very speculative investments such as GME or Doge Coin. If you could go back in time to 2020 and tell yourself to invest in these two stocks, you would think that your future self is crazy. The future seems to just keep throwing mind-defying events at us. For example, during the passage of the Covid-19 relief bill, Congress added that the Pentagon must disclose any known information on UFOs within 180 days after the new year. The deadline is Wednesday, June 30th. At first glance, this is kind of funny and something that we would normally pass on, however, there has been a flurry of declassified military videos of unidentified aerial phenomenon (UAP) or commonly known as UFOs. The Today Show shares some clips and they may be worth taking a quick look at.


Space Force was created in the past few years which shows a substantial increase in space in general. Also the US has passed defense budgets that have increased every year. Companies that Cathie Woods (ARK’s CEO) invests in may do well in any space race or increase in defense spending and private sector growth. Defense stocks such as Raytheon Technologies, Lockheed Martin, Boeing and L3 could also receive a large increase in value as if the UFOs were confirmed, more investors and government budget would likely be allocated to creating methods to defend against/communicate/observe these crafts.

Here is a brief detailing straight from the source. It is a bit lengthy but is very interesting. This also shows that potential funding could be given. Also a heightened awareness of need for defense will be introduced:

1. A detailed analysis of unidentified aerial 
        phenomena data and intelligence reporting collected or 
        held by the Office of Naval Intelligence, including 
        data and intelligence reporting held by the 
        Unidentified Aerial Phenomena Task Force;
          2. A detailed analysis of unidentified phenomena data 
        collected by:
            a. geospatial intelligence;
            b. signals intelligence;
            c. human intelligence; and
            d. measurement and signals intelligence;
          3. A detailed analysis of data of the FBI, which was 
        derived from investigations of intrusions of 
        unidentified aerial phenomena data over restricted 
        United States airspace;
          4. A detailed description of an interagency process 
        for ensuring timely data collection and centralized 
        analysis of all unidentified aerial phenomena reporting 
        for the Federal Government, regardless of which service 
        or agency acquired the information;
          5. Identification of an official accountable for the 
        process described in paragraph 4;
          6. Identification of potential aerospace or other 
        threats posed by the unidentified aerial phenomena to 
        national security, and an assessment of whether this 
        unidentified aerial phenomena activity may be 
        attributed to one or more foreign adversaries;
          7. Identification of any incidents or patterns that 
        indicate a potential adversary may have achieved 
        breakthrough aerospace capabilities that could put 
        United States strategic or conventional forces at risk; 
        and
          8. Recommendations regarding increased collection of 
        data, enhanced research and development, and additional 
        funding and other resources.
    The report shall be submitted in unclassified form, but may 
include a classified annex.

As an engineer, some evidence such as in number 2 of the text above such as geospatial, signal, human and measurement & signals are going to be the most interesting. If confirmed, this should incentivize investors to invest into something that could help figure out what these UFOs/UAPs are. Visually seeing the objects and providing radar measurements with geospatial data on these objects all simultaneously would put the nail in the coffin that these UFOs really do exist and we need to do something quick!


We think this will have an impact on defense stocks as awareness of external threats and the need to make systems to detect the objects. If this information is revealed and it becomes apparent we are exposed with no defense abilities/mechanisms to track these objects, money from investors and government alike may pour into the defense industry. We think Lockheed Martin (LMT) would benefit the most as they are industry leaders in defense technology Video here. Another good company would be Raytheon Technologies (RTX) as they are developing vision systems and laser technologies. Video here of their HEL system.

Here are some option plays for Lockheed Martin and Raytheon Technologies:

We are thinking a good option is to open a PUT credit spread (If the stocks stays at same price, or goes higher you profit at expiration 100%). On either company, we think this will have plenty of time to rise above into August & September when these options expire. Here is the play for LMT

Here is the play for RTX

Both have a statistical probability to profit 50% of the time, but with our edge and thesis, we think we have a higher chance to profit on this idea.


These pieces of news and events may or may not be true, however, we think that this is creating more awareness of the ever-growing importance of space in general. Space could be a trillion-dollar industry by 2030.


Price Forecast for ARKX

We expect this ARKX to continue to grow over time

Current Price: $20.70

One Month Target: $20.00

One Year Target: $30

Two Year Target: $80


Regardless of UFOs or not, we do believe that this ETF will start increasing in the coming years due to the growing space industry.


Click Here for an Option Idea

APPLE: AAPL


This is a stock that we have covered before and one that will probably be covered many more times in the future. “Apple, Inc. engages in the design, manufacture, and sale of smartphones, personal computers, tablets, wearables and accessories, and other variety of related services.” Apple is back on our radar for a couple of reasons this week, the tech giant reports their earnings next week, and Biden’s possible new tax plan.


Biden’s new plan shouldn’t directly impact Apple, but it may still cause a drop in the value of the stock. Biden’s going after the capital gains tax rate which would potentially lead to stockholders to sell ahead of this change to be taxed at a lower rate. “Biden's proposal calls for increasing the top marginal income tax rate to 39.6% from 37% and nearly doubling taxes on capital gains to 39.6% for people earning more than $1 million, according to sources familiar with the plan” The plan is just being talked about at this point, but investors may get out in front of this before potentially losing more gains to taxes.


Price Forecast

We expect this stock to continue to grow over time

Current Price: $134.29

One Month Target: $138

One Year Target: $155

Two Year Target: $176


The price of the stock is up 0.60% this week and is still up over 90% for the year which is why investors are being cautious to lock in their gains. The next reason we wanted to look at Apple is they report their earnings on April 28th after hours. They did report pretty incredible earnings in the first quarter so we don’t expect anything crazy in the second quarter. Apple has not announced any new products and after the holiday sales should have slowed down a little bit. However, Apple may announce they are increasing dividends to shareholders in this upcoming earnings report. “Expected to increase its dividend and authorize further stock buybacks when it announces fiscal second-quarter earnings Wednesday, part of the company’s continued focus on returning money to shareholders as it aims to reduce its sizable cash pile.” Increased dividends, as well as a good cash reserve, really makes Apple even more appealing from an investment standpoint.


Apple is still one of our favorite long-term buys. The tech company has proven its ability to produce products that people love and continue to purchase. They have not shown any signs of slowing down and the speculation of a car designed by Apple gives this company incredible upside.


This stock is a buy-in our opinion.


Click Here for an Option Idea

All stocks talked about we have invested in, and do not intend to give advice nor recommend acting upon the information.

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Until next week,


Brad Mitchell

Colby McCoy

and the Optifinancial Team

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