PPA – Should You Invest in the Invesco Aerospace & Defense ETF (PPA)?
Launched on 10/26/2005, the Invesco Aerospace & Defense ETF (PPA – Free Report) 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.
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%.
The fund is sponsored by Invesco. It has amassed assets over $1.81 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.
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 0.58%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.84%.
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 93.60% of the portfolio.
Looking at individual holdings, Boeing Co/the (BA – Free Report) accounts for about 6.72% of total assets, followed by Northrop Grumman Corp (NOC – Free Report) and Raytheon Technologies Corp (RTX – Free Report) .
The top 10 holdings account for about 52.47% of total assets under management.
Performance and Risk
Year-to-date, the Invesco Aerospace & Defense ETF return is roughly 0.23% so far, and was up about 11.06% over the last 12 months (as of 05/29/2023). PPA has traded between $64.52 and $82.25 in this past 52-week period.
The ETF has a beta of 0.98 and standard deviation of 21.13% 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.
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 – Free Report) tracks S&P Aerospace & Defense Select Industry Index and the iShares U.S. Aerospace & Defense ETF (ITA – Free Report) tracks Dow Jones U.S. Select Aerospace & Defense Index. SPDR S&P Aerospace & Defense ETF has $1.42 billion in assets, iShares U.S. Aerospace & Defense ETF has $5.59 billion. XAR has an expense ratio of 0.35% and ITA charges 0.39%.
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.