Should You Invest in the Invesco Aerospace & Defense ETF (PPA)?

Looking for broad exposure to the Industrials - Aerospace & Defense segment of the equity market? You should consider the Invesco Aerospace & Defense ETF (PPA), a passively managed exchange traded fund launched on 10/26/2005.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Industrials - Aerospace & Defense is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 16, placing it in bottom 0%.

Index Details

The fund is sponsored by Invesco. It has amassed assets over $2.93 billion, making it one of the largest ETFs attempting to match the performance of the Industrials - Aerospace & Defense segment of the equity market. PPA seeks to match the performance of the SPADE Defense Index before fees and expenses.

The SPADE Defense Index is comprised of approximately 50 U.S. companies whose shares are listed on a U.S. Exchange. These are companies that are principally engaged in the research, development, manufacture, operation and support of defense, military, homeland security and space operations.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.58%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.64%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Industrials sector--about 94.50% of the portfolio.

Looking at individual holdings, Rtx Corp (RTX) accounts for about 6.76% of total assets, followed by Lockheed Martin Corp (LMT) and Boeing Co/the (BA).

The top 10 holdings account for about 52.26% of total assets under management.

Performance and Risk

The ETF has added roughly 6.84% and it's up approximately 22.25% so far this year and in the past one year (as of 04/16/2024), respectively. PPA has traded between $77.66 and $101.71 during this last 52-week period.

The ETF has a beta of 0.93 and standard deviation of 17.46% for the trailing three-year period, making it a medium risk choice in the space. With about 53 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco Aerospace & Defense ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, PPA is an outstanding option for investors seeking exposure to the Industrials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

SPDR S&P Aerospace & Defense ETF (XAR) tracks S&P Aerospace & Defense Select Industry Index and the iShares U.S. Aerospace & Defense ETF (ITA) tracks Dow Jones U.S. Select Aerospace & Defense Index. SPDR S&P Aerospace & Defense ETF has $2 billion in assets, iShares U.S. Aerospace & Defense ETF has $5.89 billion. XAR has an expense ratio of 0.35% and ITA charges 0.40%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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Invesco Aerospace & Defense ETF (PPA): ETF Research Reports

The Boeing Company (BA) : Free Stock Analysis Report

Lockheed Martin Corporation (LMT) : Free Stock Analysis Report

iShares U.S. Aerospace & Defense ETF (ITA): ETF Research Reports

SPDR S&P Aerospace & Defense ETF (XAR): ETF Research Reports

RTX Corporation (RTX) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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