Reallocation recommendation · Tranche 1 of 3 · Revised
Deploy $314,982 into five defense, space and supply chain positions.
Fund it from cash and five low-gain holdings. Realized losses already sitting in the account absorb almost the whole gain, so the tax cost is about $1,789, not the $12,045 first estimated.
Prices as of Aug 25, 2026Revised Aug 26, 2026Full program $600–700K
At a glance
The four numbers
Raise$316,032
Cash plus the five positions with the smallest embedded gains.
Tax cost$1,789
A 0.57% drag. Realized losses already in the account cover $35,000 of the $42,713 gain.
Deploy$314,982
Five positions. One fund carries the growth and speculative weight.
Annual income−$4,621
The sleeve yields 1.01% against the cash and dividends it replaces. This is the real cost.
What changed in this revision
Three things. The tax fell from $12,045 to $1,789, because $35,000 of realized losses already sit in the funding account and the correct rate there is 23.2%, not 28.2%. The buy list went from nine positions to five, because the defense fund already held eight of the nine. And the second tranche now waits for the December funding vote, not September 30, which is only when current funding expires.
Step one
What to sell
Total basis across the account is $1.03M against $3.75M of value, so the funding source drives the cost far more than the buy list does. These six line items carry the smallest gains. Nothing here touches the largest positions.
Holdings and cost basis from the 08/25/2026 statement. Realized losses confirmed by the broker.
Sell
Shares
Proceeds
Realized gain
Income lost
Dividend and timing
Cash: savings and deposit program
—
$115,520
$0
$3,438
Interest, not dividends. Move it after the month’s interest posts.
The account already holds $35,000 of realized losses this year. They offset the gain first. That leaves $7,713 of net taxable gain. The account owner files separately with about $144,000 of income, which puts him in the 15% federal bracket, not 20%. Add 3.8% for the investment income surtax and 4.4% for Colorado and the rate is 23.2%. The bill is $1,789.
One warning. Those losses belong to one return. They cannot offset gains realized on the other return. Keep the two sets of books separate when planning the INFQ sales.
Two positions were deliberately left alone. The utility holding stays because it yields 4.0% and serves the Northern Virginia data center market against a 70,000 MW interconnection pipeline. It is not a tax decision: its gain is 19.8%, among the smallest in the account. The largest semiconductor position stays for the opposite reason. Trimming it to a 5% weight would raise $236,920 and cost $62,854 in tax. That belongs in a new tax year.
Step two
What to buy
Five positions, $314,982 in total. One fund carries the growth and speculative weight. Four direct names cover what the fund cannot. Every ticker links to Yahoo Finance.
This one position replaces five. XAR already holds KTOS at 2.65%, KRMN at 2.96%, AVAV at 2.35%, DRS at 1.90% and LUNR at 1.73%, plus 42 other companies. Buying those five directly and then buying XAR would have meant owning each of them twice. The December funding vote is binary, and 47 names survive a bad outcome better than five small ones do. Modified equal weight matters here: in the cap-weighted alternative, ITA, those same five names sit at 0.15% to 0.35%.
Bought directly because XAR gives it only 2.39%. It won $955M of the $1.75B Space Development Agency Tranche 3 award on July 13, the largest confirmed Golden Dome contract to date. Record $42B backlog, guidance raised, and it trades one percent off its 52-week low because a spinoff IPO slipped to 2027. The business did not break. 52-week range $260.95 to $379.23.
Golden Dome OTA winner with two direct ties, the C4ISR ground layer and space interceptors. The longest dividend growth streak in the sleeve at 35 straight years. 52-week range $306.77 to $400.00.
Cheapest forward multiple of the three primes. Space radar and sensors, plus $1B of its own capital committed with Apex to space-based interceptors. Trades 30% off its high. 52-week range $479.02 to $774.00.
Bought directly because XAR does not hold it at all. Neither does ITA. Rare earth magnets sit under every drone motor and actuator in the sleeve, so this is the hedge against the one supply-chain risk the fund cannot cover. Sized small because of the multiple. 52-week range $37.81 to $100.25.
Why five and not nine
The first draft bought nine names. A check of the fund’s holdings showed XAR already held eight of them, at a combined 19.8%. Buying both would have meant owning L3Harris three ways. The rule going forward: hold the fund as the core, and take a direct position only where the fund’s weight is too small to express the view, as with L3Harris at 2.39%, or where the fund has no exposure at all, as with MP Materials at zero.
The remaining overlap is accepted, not solved. XAR holds L3Harris at 2.39%, General Dynamics at 3.05% and Northrop at 2.76%, about $12,357 of duplicate exposure. That is roughly a 4% add to each prime.
Step three
Why this is staged
No FY2027 defense appropriation is enacted. The House passed a stopgap through December 4. The Senate passed a competing one through December 11 on August 8. Neither chamber has reconciled them. Current funding expires September 30.
September 30 is an expiry date, not a clarity date. Nothing is resolved that day. The stopgaps carry into December, and full-year appropriations land in the first half of 2027. The decision point that matters is the December vote.
The reason the sector fell is mechanical. Of the $17.9B requested for Golden Dome, $17.1B sits in reconciliation rather than appropriations, and budget resolutions carry $60B against a $350B ask. Backlogs grew while prices fell 30% to 60%. That is a policy gap, not an earnings problem, and it is why the growth and speculative weight now sits inside a fund.
Deploy $314,982
Now · $1,789 of tax
The five positions above. One fund, one satellite, two dividend anchors, one supply chain hedge.
Deploy up to $300,000
After the December vote
Fund from the next tier of low-gain positions. Add a fourth prime, or size up the fund, depending on what the appropriation actually does.
Decide, do not pre-commit
January 2027 · new tax year
The natural funding source is the standing trim of the largest semiconductor position.
On total size: $1,000,000 would be 26.7% of the account, all in one theme riding on one appropriations process. That replaces one concentration problem with another. A landing zone of $600,000 to $700,000, roughly 16% to 19%, is the defensible target.
The obvious alternative to XAR, and the wrong one here. It is 21.35% GE Aerospace and 9.12% Boeing, so a third of it is commercial aerospace. The small and mid-cap defense names sit at 0.15% to 0.35%, seven to twelve times lighter than in XAR.
A $40.4B market cap on $769M of revenue, roughly 52x sales against the framework’s 25x ceiling. The first Neutron launch in Q4 2026 is a binary event. The existing 500 shares are the position.
Real business inflection, with free cash flow moving from −$456M to +$625M, but 20.5x sales and 243x trailing earnings, and it deepens exposure this reallocation is meant to reduce.
Pays 4.21%, but the character of that payout swings hard: 52.58% return of capital in 2025, 30.73% in 2024. The utility holding already covers the electricity demand theme with qualified dividends.
Next
What happens now
Confirm the loss figure and lot selection
This week · with the CPA
The $1,789 rests on $35,000 of realized losses and a 15% federal bracket. Confirm both. Confirm specific-lot identification on each sale.
Place the sells, sequenced
Before Sep 3
Qualcomm goes ex-dividend September 3. Selling after that date captures one more quarter, worth $129. Everything else has already gone ex.
Place the buys, sequenced
Before Aug 31 and Sep 4
Northrop goes ex-dividend August 31 and L3Harris September 4, worth $632 and $1,325. Use a limit order on MP, which trades thinner than the rest.
Retire the higher-cost debt first
Separate decision, same quarter
The securities loan costs 6.75%. The mortgage costs 5.5%, or about 3.94% after the interest deduction. Every $100,000 against the loan saves $1,250 more per year. Confirm the loan balance before acting.
Set the review date
December
Size tranche 2 against what the appropriation actually does, not against the September expiry.