Defense stocks have struggled to keep up with the broader market in recent years, with annualized 5-year returns of even the best-performing defense ETFs lagging the S&P 500 by about two percentage points. Currently, there are four ETFs that follow different indices tracking the aerospace and defense industry.
Below, we look at the three defense ETFs with the lowest fees, the best 12-month return, and the most liquidity. We have excludedleveraged ETFs, which provide outsized returns but come with extra risk. All data below are as of June 16.
Tracking the S&P Aerospace & Defense Select Industry Index, the fund’s top holdings are Virgin Galactic Holdings Inc. (SPCE), BWX Technologies Inc. (BWXT), and Axon Enterprise Inc. (AXON). The fund follows a “sampling strategy” which allows the fund manager to invest in securities other than those securities comprising the underlying index, but at least 80% of the fund’s assets are invested in the index itself.
The fund seeks to replicate the yield and price of the SPADE Defense Index. The fund invests at least 90% of its assets in the underlying index, and its top three holdings are The Boeing Co. (BA), Northrop Grumman Corp. (NOC), and Raytheon Technologies Corp (RTX).
The fund seeks to replicate the performance of the Dow Jones US Select Aerospace & Defense Index, which is composed of US aerospace and defense equities. The fund invests at least 80% of its assets in the index, and its top holdings are Raytheon, Boeing, and Lockheed Martin Corp. (LMT).
Performance Over One Year: 25.1%
Expense Ratio: 0.39%
30-Day SEC Yield: 0.78%
30-Day Average Daily Volume: 452,818
Assets Under Management: $5.8 billion
Inception Date: May 1, 2006
Issuer: BlackRock Financial Management
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As of the date this article was written, the author does not own any of the above ETFs.
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The iShares U.S. Aerospace & Defense ETF (ITA 0.77%) is the largest ETF focused on defense, with $3.65 billion in net assets as of early May 2022. The ETF is designed to provide exposure to domestic United States aerospace and defense companies, as well as exposure to the commercial aerospace industry.
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