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Should You Invest in the iShares U.S. Aerospace & Defense ETF (ITA)?

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Designed to provide broad exposure to the Industrials - Aerospace & Defense segment of the equity market, the iShares U.S. Aerospace & Defense ETF (ITA - Free Report) is a passively managed exchange traded fund launched on 05/01/2006.

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.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Industrials - Aerospace & Defense is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 5, placing it in top 31%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $5.62 billion, making it one of the largest ETFs attempting to match the performance of the Industrials - Aerospace & Defense segment of the equity market. ITA seeks to match the performance of the Dow Jones U.S. Select Aerospace & Defense Index before fees and expenses.

The Dow Jones U.S. Select Aerospace & Defense Index measures the performance of the aerospace and defense sector of the U.S. equity market.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.39%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 1.07%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. 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 99.50% of the portfolio.

Looking at individual holdings, Raytheon Technologies Corp (RTX - Free Report) accounts for about 20.84% of total assets, followed by Boeing (BA - Free Report) and Lockheed Martin Corp (LMT - Free Report) .

The top 10 holdings account for about 76.15% of total assets under management.

Performance and Risk

The ETF has lost about -1.59% and is up roughly 12.28% so far this year and in the past one year (as of 05/25/2023), respectively. ITA has traded between $91.19 and $117.74 during this last 52-week period.

The ETF has a beta of 1.02 and standard deviation of 24.10% for the trailing three-year period, making it a medium risk choice in the space. With about 40 holdings, it has more concentrated exposure than peers.

Alternatives

IShares U.S. Aerospace & Defense ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, ITA is a reasonable option for those seeking exposure to the Industrials ETFs area of the market. Investors might also want to consider some other ETF options in the space.

SPDR S&P Aerospace & Defense ETF (XAR - Free Report) tracks S&P Aerospace & Defense Select Industry Index and the Invesco Aerospace & Defense ETF (PPA - Free Report) tracks SPADE Defense Index. SPDR S&P Aerospace & Defense ETF has $1.45 billion in assets, Invesco Aerospace & Defense ETF has $1.79 billion. XAR has an expense ratio of 0.35% and PPA charges 0.58%.

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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