The JEDI ETF

Full disclosure: I’ve been building a position since March. While I have long maintained a position in the ITA – iShares US Aerospace & Defense ETF – to get exposure to what I expect to be a multi-year supply-demand mismatch for munitions caused by the prolonged conflict between Russia and Ukraine, JEDI seemed a nice way to barbell exposure by adding some names with real skin in the drone industry.

Within the ETF is a handful of space names that are benefiting from the “afterburner trade”: buy anything related to Space X. RDW is one of those winners: from 9:30AM to 9:45AM (May, 26th), it has added another 15%. They have established relationships with Space X and Blue Origin. As a result, the growthier side of my defense barbells is flying…

Let Flyers Fly

Many of these companies are pre-market cap (<$10B in market cap) and may be pricing in growth (from space) that isn’t likely to materialize in any discountable time period. This was meant to be a long-term position in the portfolio. It still will be; but, it is okay to trim — and trim big — if an asset you like is inflating into a bubble.

It won’t happen today… how could it?

Kind of the point of my last handful of comments on pods and posts:

Riding winners is hard.

Calling the top is just as impossible as calling the bottom.

I expect the run to last as long as the market’s love affair with Space X. As small-caps, these names also stand to benefit from rate cuts. Peace in the Middle East would catalyze a small-cap rotation.

I’ll right-size the position when the technicals give me permission through a combination of moving averages. Until then, I’ll let this flyer fly. JEDI still has a lot going for it.