Defense: A Top ETF in a "Hot Sector"


John Persinos Image John Persinos Managing Editor, Personal Finance

The SPDR S&P Aerospace & Defense ETF (XAR) is considered the benchmark for the aerospace & defense industry, which is one of the hottest sectors you can find right now, asserts John Persinos, editor of Investing Daily's Personal Finance.

The exchange-traded fund’s top holdings represent a “who’s who” of major defense contractors, all of which are poised for a multi-year boom as the Trump administration significantly boosts defense spending.

Because Pentagon spending tends to be recession and inflation resistant, XAR is a defensive growth play that also serves double-duty as a hedge. This issue, we’re adding XAR to the Sector sleeve of our Growth Portfolio.

The surest way to make money over the long term is to tap megatrends with momentum, and ever-bigger defense budgets are a fact of existence that will probably never go away.

Military spending also is vital for national economies and job creation, which makes the defense sector an even more attractive investment proposition. XAR’s portfolio boasts defense companies that are perennial recipients of Pentagon largesse.

Triumph Group (TGI) designs, manufactures, repairs and overhauls aerostructures, aircraft components, accessories, subassemblies, and systems worldwide, making it a crucial supplier for major aerospace/defense OEMs.

As such, TGI is a “picks-and-shovels” play that’s indispensable for blue-chip manufacturers. TGI’s modest valuation (market cap: $1.6 billion) gives it room for even greater growth than XAR’s mega-cap holdings.

Lockheed Martin (LMT) is the largest defense contractor in the world.