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Defense stocks have been rising with escalation of tensions between the US and North Korea, while the broader stock rally has stalled. Raytheon (RTN - Free Report) , Lockheed Martin (LMT - Free Report) and Northrop Grumman (NOC - Free Report) hit record highs after President warned North Korea against making any more threats to the US.

Trump said North Korea faces ‘fire and fury like the world has never seen before” and the rogue nation responded by threatening to launch a missile strike on Guam.

The sentiment for Aerospace & Defense stocks improves with rising geopolitical tensions. They surged after US missile strikes on Syria.  And, that is one of main reasons why these stocks performed well in the last few years, despite defense budget cuts in the US and Europe.

Many developing countries including India, UAE, Saudi Arabia and Brazil have increased their defense spending over the past few years. Of late, Japan and South Korea have also boosted their defense spending in response to increased military spending by China. Trump’s budget proposals call for a boost in US defense spending, which would be positive for these stocks.

Most aerospace & defense companies reported excellent earnings for Q2 and have seen continued positive momentum in earnings estimates. Aerospace & Defense ETFs have significantly outperformed the broader market this year.

To learn more about top ranked Aerospace & Defense ETFs--the iShares U.S. Aerospace & Defense ETF (ITA - Free Report) , the SPDR S&P Aerospace & Defense ETF (XAR - Free Report) and thePowerShares Aerospace & Defense Portfolio (PPA - Free Report) , please watch the short video above.

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Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

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