iShares US Aerospace and Defense ETF (NYSEARCA:ITA)
For investors seeking the most popular choice in the aerospace and defense ETF world, this iShares fund is definitely it. This cap-weighted fund tracks the Dow Jones US Select Aerospace and Defense Index, holding just under 40 stocks in its basket.
Unlike XAR, this product has a large cap focus, as big cap stocks make up more than 50% of the portfolio compared to roughly a quarter for mid caps. Familiar names like United Technologies (NYSE:UTX), Boeing (NYSE:BA), and Lockheed Martin (NYSE:LMT) take the top three spots, and together these three account for more than 23% of the total assets.
This fund also receives a Zacks ETF Rank #1 (Strong Buy), and it may be a top pick for investors seeking a global low risk play on this industry (see all the Top Ranked ETFs here).
Top Aerospace and Defense Stocks:
Huntington Ingalls Industries (NYSE:HII)
If you are looking for more of a nautical play on the defense industry, consider HII. This company primarily builds, designs, and repairs ships for the U.S. Navy and the Coast Guard, ranging from nuclear-powered ships like aircraft carriers and subs, to amphibious assault vehicles and coastal defense ships.
HII has seen very strong positive earnings estimate revisions as of late, including universal agreement for both the current quarter and the current year. in fact, the current year consensus has soared from $6.22/share 30 days ago, to its level today at $7.04/share, suggesting that analysts believe a bright future is ahead for HII.
Thanks to these factors, HII currently has a Zacks Rank #1 (Strong Buy), meaning it could be primed for more growth in the months ahead.
Wesco Aircraft Holdings (NYSE:WAIR)
For a slightly different play on the aerospace segment, consider WAIR. This company specializes in supply chain management for a variety of aviation programs both in the military and civilian spheres. This niche could be a great one to be in as higher demand for a variety of planes and jets forces companies to become even more efficient in order to meet demanding customer needs.
WAIR has also seen rising earnings estimates as of late, and the company is looking for double digit earnings growth for both this year and next. Growth is actually expected to improve in the next year time frame compared to this year, meaning that WAIR may still have incredible potential.
Due to this, it shouldn’t be too surprising to note that WAIR has moved from a Zacks Rank #3 (Hold) up to a Zacks Rank #1 (Strong Buy) just this month, so it may be primed to see strong gains in the months ahead too (also read Best ETF Strategies for 2014).
Markets have been choppy as of late and there is definitely some worry about sector rotation. Many of the high flyers—such as in biotechnology and social media—are starting to face a modest pull-back and concerns are growing that they are due for a correction too.
In light of this, it might be time to focus on a sector that is seeing rising earnings estimates, and is well positioned to benefit from current geopolitical realities. Aerospace and defense certainly fits this bill, and any of the aforementioned picks could be solid choices to play this trend in what is otherwise a very uncertain market environment.
This article is brought to you courtesy of Eric Dutram.