NEW YORK (TheStreet) -- Investing in defense stocks such as General Dynamics (GD) , Lockheed Martin (LMT) and Northrop Grumman (NOC) is a logical strategy if you believe that the U.S. will be in a prolonged war against ISIS. However, given the significant gains these stocks have had since 2012, investors should put this strategy on hold.
President Obama has formed a coalition in a potential prolonged war against ISIS. The air strikes that began on Monday in Syria are likely to continue for a considerable time. This should lead to an increase in defense spending. However, weekly charts for these defense stocks suggest that increased spending may already be priced-in, as shares set record highs.
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Shares of General Dynamics, Lockheed Martin and Northrop Grumman set all-time intraday highs on Friday moving with the Dow Jones Industrial Average and the S&P 500 which also set all-time highs the same day.
Many analysts are advising investors to buy defense stocks now, but the weekly chart for Lockheed Martin shows the risk that a defense stock bubble could pop sooner rather than later. Investors who lost money following the popping the tech bubble in March 2000 will clearly see the inflating parabolic bubble for shares of Lockheed Martin.
Courtesy of MetaStock Xenith
The Weekly Chart for Lockheed Martin: Looking from the lower left to the upper right Lockheed Martin has been one of the best stock investments since the end of 1999.
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