Tag: SPDR S&P Aerospace & Defense ETF (XAR)

How Can You Play This Arms Race?

Posted on by Matt Thalman

The United Nations and other allied states around the world have been supporting Ukraine with military supplies since the very early days of the war. With the war in Europe still raging more than a year after it began, allied munitions stockpiles and military supplies are starting to get thin.

But, at some point, these countries' reserves will reach a depleted level they are no longer comfortable with and be forced to restock. Let's be honest; that point has already come and gone.

So today, countries in Europe and America are not only still giving Ukranie military aid, but also replacing their arms.

But something similar is also occurring in Asia, as China continues with aggressive talk pertaining to Taiwan. Furthermore, China has been heavily spending on its own military and set its defense spending growth at 7.2% in 2023, in line with where it was in 2022.

Even here in the U.S., the projected 2024 budget for defense spending came in at $842 billion, or $26 billion higher than where it was in 2023 and more than $100 billion higher than in 2022.

Even if the war weren't taking place in Europe today, there would likely be an arms race around the world, and many believe it will only get worse since geopolitical tensions are still brewing in Asia.

So, how can you play this arms race?

Buy Defense and Aerospace Exchange Traded Funds and relax.

Not sure which ones to buy? Let's take a look at a few.

The first ETF I would look at is the iShares U.S. Aerospace & Defense ETF (ITA).

ITA is the largest Defense and Aerospace ETF, with just over $6 billion in assets under management. ITA also has a reasonable expense ratio at 0.39% and has had a solid performance over the last few years. ITA is up 4.32% year-to-date but more than 14.9% annualized over the previous three years. ITA also has 100% of its assets invested in U.S. companies and has 37 holdings. Continue reading "How Can You Play This Arms Race?" →

ETFs For Increasing Military Spending

Posted on by Matt Thalman

As we approach the one-year anniversary of the start of the Russian-Ukraine war, we are seeing more evidence that a significant boom is continuing in the defense industry.

I know what you may be thinking... the rally in defense stocks has already occurred, and the time to buy these stocks was at the start of the war in Ukraine.

While that would have been the ideal time to buy defense stocks, just because you didn’t buy back then doesn’t mean now is also not a good time to buy.

Let me explain why now is an excellent time to buy defense stocks, or better yet, Exchange Traded Funds that focus on defense stocks, and then I will give you a few different defense ETFs that you can buy today.

The Foundation for Defense of Democracies Center on Military and Political Power recently estimated that the total spending required by United States NATO allies could be as high as $21.7 billion to replace military equipment given to Ukraine to fight the war with Russia.

That number could be higher or lower based on how different countries decide to replace arms that were given to Ukraine, but the point is if NATO member countries want to build their own militaries back up to meet the level they were before the Russian-Ukraine war began, a lot of money will need to be spent, to get them back to par.

Furthermore, based on the situation in Ukraine, many believe that we will not only see countries replenish their weapons stockpiles but increase what they have in reserve.

Additionally, we are seeing more countries apply for acceptance into NATO since the Russian invasion of Ukraine. As we see NATO increase in size, it is likely that the alliance will also increase its own arms stockpile.

Ideally, the Russian-Ukraine war will end soon, and this conflict will be a short-term catalyst for defense spending.

But even if you are on the fence about the defense industry in the short term, the long-term prospects of the industry still look good. Continue reading "ETFs For Increasing Military Spending" →

ETFs That Focus On Military-Friendly Companies

Posted on by Matt Thalman

Most people would agree that military life isn’t an easy one, both while serving and once someone becomes a veteran. But there are a few companies that are trying to make our service members lives easier both while they are serving in the armed forces and after they hang up their uniforms.

Obviously, while someone is a member of any of the branches of our military, they are using tools, weapons, vehicles, and technology built by an aerospace and defense company which makes their lives easier and ideally their jobs safer. Let’s take a look at a few Exchange Traded Funds that operate in the development and manufacturing of these products.

One of the larger aerospace and defense ETFs, based on assets under management is the iShares U.S. Aerospace & Defense ETF (ITA). The fund carries a 0.43% expense ratio, it holds 35 stocks, with the top ten representing 75.44% of the assets, (largely due to Boeing Company (BA) and United Technology (UTX) representing 22.97% and 15.52% of the fund respectively). ITA also has a nice 1.09% dividend yield, a weighted average market cap of $80.96 billion, and average trading volume of $30.15 million. The fund has also been in existence since 2006, and its ten-year average annual performance is a positive 19.44%, making this one of the better performing ETFs over the last decade. Year-to-date the fund is up 24.25%. Continue reading "ETFs That Focus On Military-Friendly Companies" →