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

Launched on 10/26/2005, the Invesco Aerospace & Defense ETF (PPA) is a passively managed exchange traded fund designed to provide a broad exposure to the Industrials - Aerospace & Defense segment of the equity market.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient 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 16, placing it in bottom 0%.

Index Details

The fund is sponsored by Invesco. It has amassed assets over $669.14 million, making it one of the average sized 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

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.61%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.57%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Industrials sector--about 92.40% of the portfolio.

Looking at individual holdings, Raytheon Technologies Corp (RTX) accounts for about 6.37% of total assets, followed by Northrop Grumman Corp (NOC) and Lockheed Martin Corp (LMT).

The top 10 holdings account for about 52.13% of total assets under management.

Performance and Risk

The ETF return is roughly 1.79% so far this year and is up about 10.21% in the last one year (as of 01/12/2022). In that past 52-week period, it has traded between $64.60 and $77.50.

The ETF has a beta of 1.13 and standard deviation of 26.78% for the trailing three-year period, making it a medium risk choice in the space. With about 54 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) 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 $1.13 billion in assets, iShares U.S. Aerospace & Defense ETF has $2.55 billion. XAR has an expense ratio of 0.35% and ITA charges 0.42%.

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
 
Lockheed Martin Corporation (LMT): Free Stock Analysis Report
 
Northrop Grumman Corporation (NOC): Free Stock Analysis Report
 
iShares U.S. Aerospace & Defense ETF (ITA): ETF Research Reports
 
SPDR S&P Aerospace & Defense ETF (XAR): ETF Research Reports
 
Raytheon Technologies Corporation (RTX): Free Stock Analysis Report
 
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