Unfortunately, today’s news headlines are rife with “Terrorist Bombing in New York City” and “Airstrikes in Syria and Afghanistan” topics, which brings to mind a segment of ETFs that are directly linked to the so-called War on Terror.
The iShares Dow Jones US Aerospace & Defense ETF (NYSE:ITA) (Expense Ratio 0.43%) is the largest ETF in the Aerospace and Defense subsector, with $859 million in assets under management. ITA has raised a noticeable $119 million year-to-date in terms of new creations in the fund, and is now almost three times larger in terms of asset size than the next largest ETF in the segment, PPA (PowerShares Aerospace & Defense, Expense Ratio 0.66%, $310 million in AUM).
SPDR launched a similar fund back in late 2011 with XAR (SPDR S&P Aerospace & Defense, Expense Ratio 0.35%), and this fund has managed to raise about $192 million since inception as well. These flows reflect a healthy appetite for exposure to this specific sub-sector which falls under the broader category of Industrial Equity.
Getting back to ITA, when we look at the top holdings that populate this etf, we find:
|Symbol||Company||% of Total|
|UTX||United Technologies Corp||8.86%|
|LMT||Lockheed Martin Corp||7.83%|
|GD||General Dynamics Corp||6.87%|
|NOC||Northrop Grumman Corp||6.1%|
|TDG||TransDigm Group Inc||4.11%|
|LLL||L-3 Communications Holdings Inc||3.47%|
|COL||Rockwell Collins Inc||3.2%|
XAR, on the other hand utilizes the familiar “modified equal-weighting methodology” that several other specialty sector SPDRs use, and therefore has completely different exposures than ITA or PPA, with top five weightings that look like the following: 1) TDG (4.41%), 2) GD (4.33%), 3) TXT (4.25%), 4) UTX (4.20%), and 5) RTN (4.13%).
ITA shares rose $0.93 (+0.74%) to $127.00 in Monday afternoon trading. Year-to-date, the fund has risen 7.43%, beating the S&P 500’s 4.83% gain in the same period.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.