The iShares U.S. Aerospace & Defense ETF (ITA) offers investors a convenient way to access the Industrials – Aerospace & Defense sector of the equity market. Launched in 2006, this passively managed ETF has gained immense popularity among both institutional and retail investors due to its low costs, transparency, and tax efficiency. It is particularly well-suited for long-term investment strategies.
Sector ETFs like ITA provide investors with exposure to a broad range of companies within a specific industry. This diversification helps minimize risk while offering access to a sector with significant growth potential. The Industrials – Aerospace & Defense sector, one of the 16 broad Zacks sectors, is currently ranked 1, placing it in the top 6% of all sectors.
ITA is sponsored by Blackrock, a leading investment management firm, and has amassed over $6.64 billion in assets. The ETF seeks to track the performance of the Dow Jones U.S. Select Aerospace & Defense Index, which measures the performance of the U.S. aerospace and defense sector.
Expense Ratio and Performance
Expense ratios are crucial when evaluating an ETF’s total return. Lower expense ratios can significantly impact long-term performance. ITA boasts an annual operating expense ratio of 0.40%, placing it among the cheaper options in its category. The ETF also offers a trailing 12-month dividend yield of 0.84%.
Portfolio Composition and Holdings
While ETFs offer diversification benefits, understanding their holdings is essential. ITA’s portfolio is heavily concentrated in the Industrials sector, with approximately 99.70% allocated to this sector. Among its individual holdings, GE Aerospace (GE) accounts for a significant portion (18.43%) of total assets, followed by RTX Corp (RTX) and Boeing (BA). The top 10 holdings represent around 76.93% of total assets under management.
Performance and Risk
ITA has delivered a strong year-to-date return of approximately 15.22% and a 12-month return of roughly 26.94% (as of August 29, 2024). The ETF has traded between $103.16 and $145.30 over the past 52 weeks. With a beta of 0.97 and a standard deviation of 18.55% over the trailing three-year period, ITA is considered a medium-risk investment.
Alternatives
ITA holds a Zacks ETF Rank of 2 (Buy), reflecting its strong expected asset class return, expense ratio, and momentum. Investors seeking exposure to the Industrials – Aerospace & Defense sector may also consider alternative ETFs, such as:
* SPDR S&P Aerospace & Defense ETF (XAR): Tracks the S&P Aerospace & Defense Select Industry Index. It has $2.30 billion in assets and an expense ratio of 0.35%.
* Invesco Aerospace & Defense ETF (PPA): Tracks the SPADE Defense Index. It has $3.76 billion in assets and an expense ratio of 0.58%.
