Thematic Update: Modern Warfare

Over the past year, we’ve spent more and more time following the developments of the defense industry as a key thematic trend. Our foray into the landscape was with the creation of a Drone basket in our 25 Trades for 2025 – a bit of a flier on the “Drones over New Jersey!” panic of late 2024.

But sometimes it’s the simplest observations that actually work the best. The Drones basket turned out to be one of our best performing trade ideas of the year, turbocharged by a chaotic run of geopolitical events that emphasized the rapid evolution of asymmetric modern warfare, along with large jumps in global defense spending.

Recognizing a strong theme emerging, we dug deeper into defense in the past year with The New WFH (War From Home), and we continue to maintain an allocation to the theme in the Citrindex. For good reason. The theme spans multiple critical forces – all of which provide huge tailwinds.

Evolving winners of “Fiscal Primary” favoring defense

Disruptive technology with public market opportunity

Geopolitical tailwinds in an increasingly fractured world

These catalysts are only accelerating.

While it is inevitable that most dollars of government spending will go to the major defense primes, our coverage has tended to focus on smaller enablers of “modern warfare” – that is, companies that provide more direct exposure to the trends with the highest pace of acceleration – autonomous systems (drones), modern weapons (lasers), and spectrum dominance (electronic warfare). And while it may not come off as the most sophisticated methodology, our “ripped-from-the-headline” approach continues to work out for us fairly well.

For example, there was nothing secretive about the massive US naval buildout around Venezuela in late 2025, and it didn’t take a four star general to think that “regime change” was on the table. Simply noting the possibility of regime change and highlighting the upside potential of defaulted Venezuelan sovereign bonds and oil service companie…