Designed to provide broad exposure to the Industrials - Aerospace & Defense segment of the equity market, the Invesco Aerospace & Defense ETF (PPA Quick QuotePPA - Free Report) is 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.

Sector ETFs are also funds of convenience, offering many ways 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 5, placing it in top 31%.

Index Details

The fund is sponsored by Invesco. It has amassed assets over $4.56 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 0.54%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Industrials sector--about 93% of the portfolio.

Looking at individual holdings, Lockheed Martin Corp (LMT Quick QuoteLMT - Free Report) accounts for about 7.58% of total assets, followed by Rtx Corp (RTX Quick QuoteRTX - Free Report) and General Electric Co (GE Quick QuoteGE - Free Report) .

The top 10 holdings account for about 56.87% of total assets under management.

Performance and Risk

The ETF has added roughly 30.38% so far this year and was up about 49.61% in the last one year (as of 10/22/2024). In that past 52-week period, it has traded between $79.63 and $119.77.

The ETF has a beta of 0.93 and standard deviation of 17.34% for the trailing three-year period, making it a medium risk choice in the space. With about 56 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco 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, PPA 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 Quick QuoteXAR - Free Report) tracks S&P Aerospace & Defense Select Industry Index and the iShares U.S. Aerospace & Defense ETF (ITA Quick QuoteITA - Free Report) tracks Dow Jones U.S. Select Aerospace & Defense Index. SPDR S&P Aerospace & Defense ETF has $2.52 billion in assets, iShares U.S. Aerospace & Defense ETF has $6.51 billion. XAR has an expense ratio of 0.35% and ITA charges 0.40%.

Bottom Line

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