For sectors that ready to embrace change, now’s the time with the Covid-19 pandemic turning a lot of industries upside down. With this challenge, companies can utilize innovation and that’s exactly what the aerospace and defense industry is primed to do, which should boost certain exchange-traded funds (ETFs).
“As the old business adage goes: never waste a good crisis. Of course, the aerospace industry has never seen a crisis quite like the current coronavirus-driven downturn, but for some, that maxim remains as relevant as ever,” a FlightGlobal article explained. “Jeffrey Lam, the newly installed president of ST Engineering’s aerospace division, can be counted among that group. While Covid-19 has caused the unit’s business to plunge – at points by up to 90% – he remains unflustered, and instead sees an opportunity in the current situation.”
“A crisis like this offers us opportunities,” Lam told FlightGlobal. “For example, what… are some of the growth and acquisition opportunities? We continue to focus on partnership opportunities, looking for acquisitions, in the right space, at the right time. So we do have active discussions ongoing, for example, [about] some partnership arrangements outside of Singapore. A crisis is an opportunity not to be missed.”
Can Aerospace ETFs Take Off?
ETFs to take advantage of include the Invesco Aerospace & Defense ETF (PPA ). PPA seeks to track the investment results (before fees and expenses) of the SPADE® Defense Index. The fund generally will invest at least 90% of its total assets in the securities that comprise the underlying index, which is composed of common stocks of companies that are engaged principally in the development, manufacture, operation and support of U.S. defense, military, homeland security and space operations.
While big name players in the airline industry have taken a hit like Boeing (which comprises almost 8% of the fund’s holdings as of 10/9/20) due to the pandemic, the fund also mixes in large cap movers and shakers in the defense industry like Lockheed Martin and Northrop Grumman. Other names within their top 10 holdings include Raytheon Technologies and Honeywell International.
Another option within the sector to check out is the SPDR S&P Aerospace & Defense ETF (XAR ), in particular, could be in play. XAR seeks to provide investment results that correspond generally to the total return performance of the S&P Aerospace & Defense Select Industry Index, which represents the aerospace and defense segment of the S&P Total Market Index. In seeking to track the performance of the S&P Aerospace & Defense Select Industry Index, the fund employs a sampling strategy.