{"id":3001,"date":"2022-12-08T00:41:50","date_gmt":"2022-12-08T00:41:50","guid":{"rendered":"http:\/\/blog.valuengine.com\/?p=3001"},"modified":"2022-12-08T00:41:50","modified_gmt":"2022-12-08T00:41:50","slug":"how-much-runway-room-remains-for-the-aerospace-defense-sector","status":"publish","type":"post","link":"http:\/\/blog.valuengine.com\/index.php\/how-much-runway-room-remains-for-the-aerospace-defense-sector\/","title":{"rendered":"How Much Runway Room Remains for the Aerospace\/Defense Sector?"},"content":{"rendered":"

This year Aerospace stands out as one of the few industry sectors with a positive return other than energy and utilities. \u00a0 For example, the iShares U.S. Aerospace & Defense ETF (<\/span>ITA)<\/b>, the largest ETF by assets representing the industry, returned 15.2% over the past twelve months in contrast to the -13.6% return posted by the S&P 500 Index.\u00a0<\/span><\/p>\n

When a sector outperforms the market benchmark so dramatically in a given year, the question a manager must ask is whether the next year will see this trend continue or if the sector has become overpriced to the point that it will soon mean-revert. ValuEngine provides company, sector and ETF reports that provide analytic frameworks to explore potential answers to this and similar questions.<\/span><\/p>\n

All 5,000 stocks, 16 sector groups, 140 industries, and 500 ETFs have been updated<\/b><\/h5>\n
Two week free trial: <\/b>www.ValuEngine.com<\/b><\/a>\u00a0\u00a0<\/b><\/h5>\n

Today\u2019s analysis includes four companies in the Aerospace\/Defense industry sector measured against the ETF <\/span>ITA <\/b>and the Vanguard S&P 500 Index ETF (<\/span>VOO).\u00a0 <\/b>Each of the four companies was chosen for specific reasons.<\/span><\/p>\n

Axon Enterprise, Inc. <\/span>(AXON)<\/b>: The Company develops technology and weapon products for military, law enforcement, and civilians. Its initial product and former namesake is the Taser, a line of electroshock weapons. <\/span>AXON <\/b>is based in Scottsdale AZ. ValuEngine rates <\/span>AXON<\/b> 2 out of 5 on the basis of projected price returns relative to the entire ValuEngine universe. It is a top-ten holding of <\/span>ITA<\/b>, the ETF we are using as the benchmark for the Sector that includes such things as systems and aerostructures; unmanned aircraft systems; electro-optic, night vision, and countermeasures systems; naval systems; land vehicle systems; munitions, cyber systems; electronic warfare and signal intelligence systems; and other commercial activities. The company markets its systems and products as a prime contractor or subcontractor to various governments and companies. It also has operations in the United States, Europe, Latin America, the Asia-Pacific, and internationally. The company was incorporated in 1966 and is based in Haifa, Israel.<\/span><\/p>\n

Current ValuEngine reports on these stocks or ETFS can be viewed <\/b>HERE<\/b><\/a><\/h5>\n

Elbit Systems <\/span>(ESLT)<\/b>: The Company develops and supplies a portfolio of airborne, land, naval systems and products for defense, homeland security, and commercial aviation applications primarily in Israel. Products and services include military aircraft and helicopter systems; commercial aviation systems; unmanned aircraft systems; electro-optic, night vision, countermeasures systems; naval systems; land vehicle systems; munitions, cyber systems; electronic warfare and signal intelligence systems; and other commercial activities. The company markets its systems and products as a prime contractor or subcontractor to various governments and companies. It also has operations in the United States, Europe, Latin America, the Asia-Pacific, and internationally. The company was incorporated in 1966 and is based in Haifa, Israel but has its primary stock listing in the USA on Nasdaq.<\/span><\/p>\n

Kratos Defense & Security Solutions, Inc. <\/span>(KTOS)<\/b> operates as a government contractor of the U.S. Department of Defense. The company operates through two segments, Kratos Government Solutions and Unmanned Systems. The Kratos Government Solutions segment offers microwave electronic products, space and satellite communications, training and cybersecurity\/ warfare, C5ISR\/ modular systems, turbine technologies, and defense and rocket support services. The Unmanned Systems segment provides unmanned aerial systems and unmanned ground and seaborne systems. It serves national security related agencies, the department of defense,\u00a0 classified agencies and international government agencies that include both domestic and international commercial customers. Kratos Defense & Security Solutions, Inc. was incorporated in 1994 and is headquartered in San Diego, CA.<\/span><\/p>\n

Lockheed Martin Corporation <\/span>(LMT)<\/b> engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services worldwide. It operates through four segments: Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space. It primarily serves the U.S. government, as well as foreign military sales contracted through the U.S. government. It was founded in 1912 and is headquartered in Bethesda, Maryland.\u00a0 It is the second largest aerospace company in the USA behind Raytheon, Inc.<\/span><\/p>\n

More insights into the two ETFs:<\/span><\/p>\n

Current ValuEngine reports on these stocks or ETFS can be viewed <\/b>HERE<\/b><\/a><\/h5>\n

iShares U.S. Aerospace & Defense ETF<\/span> (<\/span>ITA<\/b>) tracks a market-cap-weighted index of US-listed manufacturers, assemblers and distributors of aircraft and aircraft parts primarily used in commercial or private air transport including producers of components and equipment for the defense industry, including military aircraft, radar equipment and weapons.\u00a0 The fund caps its holdings to meet diversification requirements, limiting a single company to 22.5% of the fund\u2019s assets, and preventing completely unbiased exposure to the top few that dominate the industry. Concentration risk remains high; the top five holdings comprise 55% of its portfolio. Despite this, ITA still allocates holdings to a mixture of large, mid, and small-cap companies. The fund uses a representative sampling strategy in lieu of full replication. The index is rebalanced quarterly.<\/span><\/p>\n

Vanguard S&P 500 ETF<\/span> (VOO) <\/b>tracks the S&P 500, a<\/span> market-cap-weighted index of US large- and mid-cap stocks selected by the S&P Committee and the dominant mutual fund and institutional benchmark in the USA.\u00a0 As mentioned in the past, <\/span>VOO<\/b> and <\/span>IVV<\/b> (the iShares S&P 500 ETF) are both superior alternatives for most investors for buying new shares.\u00a0 The combination of lower fees and a more efficient structure allowing for stock lending and dividend reinvestment improves investor net returns by an average of 0.14% (14 basis points) per annum.<\/span><\/p>\n

The table below provides summary info for all four stocks and two ETFs.\u00a0 All data are as of December 4, 2022. More comprehensive analysis can be found by pulling up the underlying ValuEngine reports.<\/span><\/p>\n

Current ValuEngine reports on these stocks or ETFS can be viewed <\/b>HERE<\/b><\/a><\/h5>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
<\/td>\nAXON<\/b><\/td>\nESLT<\/b><\/td>\nKTOS<\/b><\/td>\nLMT<\/b><\/td>\nITA<\/b><\/td>\nVOO<\/b><\/td>\n<\/tr>\n
<\/td>\nAxon Enterprise Inc.<\/b><\/td>\nElbit Systems<\/b><\/td>\nKratos Defense & Security<\/b><\/td>\nLockheed Martin Corp.<\/b><\/td>\niShares US Aerospace\/Defense\u00a0<\/b><\/td>\nVanguard S&P 500 ETF\u00a0<\/b><\/td>\n<\/tr>\n
ValuEngine Rating<\/b><\/td>\n2<\/b><\/td>\n5<\/b><\/td>\n4<\/b><\/td>\n3<\/b><\/td>\n5<\/b><\/td>\n3<\/b><\/td>\n<\/tr>\n
Market Cap ($B) or AUM\u00a0<\/b><\/td>\n13.4 B<\/span><\/td>\n7.5 B<\/span><\/td>\n1.3 B<\/span><\/td>\n130.0 B<\/b><\/td>\n4.3 B\u00a0<\/span><\/p>\n

AUM<\/span><\/td>\n

270.6 B<\/span><\/p>\n

AUM<\/span><\/td>\n<\/tr>\n

VE Forecast 3-mo. Price Return<\/b><\/td>\n+2.82%<\/span><\/td>\n+3.77%<\/b><\/td>\n+0.55%<\/span><\/td>\n+3.74%<\/span><\/td>\n+3.75%<\/span><\/td>\n+2.02%<\/span><\/td>\n<\/tr>\n
VE Forecast 6-Mo. Price Return<\/b><\/td>\n+8.79%<\/b><\/td>\n+2.45%<\/span><\/td>\n+0.28%<\/span><\/td>\n+6.96%<\/span><\/td>\n+6.40%<\/span><\/td>\n+5.21%<\/span><\/td>\n<\/tr>\n
VE Forecast 1-yr. Price Return<\/b><\/td>\n-11.00<\/span>%<\/b><\/td>\n+14.58%<\/b><\/td>\n+8.95%<\/span><\/td>\n+0.25%<\/span><\/td>\n+1.29%<\/span><\/td>\n-2.15%<\/span><\/td>\n<\/tr>\n
Last mo. Price Return<\/span><\/td>\n+30.03%<\/b><\/td>\n-13.93%<\/span><\/td>\n-8.16%<\/span><\/td>\n+2.94%<\/span><\/td>\n+7.86%<\/span><\/td>\n+8.56%<\/span><\/td>\n<\/tr>\n
Last 3 mo. Price Return<\/span><\/td>\n+63.09%<\/b><\/td>\n-17.41%<\/span><\/td>\n-18.32%<\/span><\/td>\n+18.55%<\/span><\/td>\n+13.96%<\/span><\/td>\n+3.76%<\/span><\/td>\n<\/tr>\n
Last 6 mo. Price Return<\/span><\/td>\n+79.65%<\/b><\/td>\n-18.41%<\/span><\/td>\n-34.91%<\/span><\/td>\n+12.50%<\/span><\/td>\n+9.64%<\/span><\/td>\n-2.52%<\/span><\/td>\n<\/tr>\n
Historic 1-Yr. Price Return\u00a0<\/span><\/td>\n+18.49%<\/span><\/td>\n+14.89%<\/span><\/td>\n-52.15%<\/span><\/td>\n+50.13%<\/b><\/td>\n+15.15%<\/span><\/td>\n-11.07%<\/span><\/td>\n<\/tr>\n
Historic 5-Yr Ann. Price Return<\/span><\/td>\n+40.02%<\/b><\/td>\n+4.49%<\/span><\/td>\n-1.83%<\/span><\/td>\n+5.97%<\/span><\/td>\n+3.72%<\/span><\/td>\n+8.15%<\/span><\/td>\n<\/tr>\n
Volatility<\/span><\/td>\n48.4%<\/span><\/td>\n26.7%<\/span><\/td>\n41.5%<\/span><\/td>\n36.0%<\/span><\/td>\n26.7%<\/span><\/td>\n18.6%<\/b><\/td>\n<\/tr>\n
Sharpe Ratio\u00a0<\/span><\/td>\n0.83<\/b><\/td>\n0.17<\/span><\/td>\n-0.04<\/span><\/td>\n0.34<\/span><\/td>\n0.14<\/span><\/td>\n0.46<\/span><\/td>\n<\/tr>\n
Beta<\/span><\/td>\n0.70<\/span><\/td>\n0.64<\/b><\/td>\n0.94<\/span><\/td>\n0.74<\/span><\/td>\n1.10<\/span><\/td>\n1.00<\/span><\/td>\n<\/tr>\n
# of Stocks<\/span><\/td>\n1<\/span><\/td>\n1<\/span><\/td>\n1<\/span><\/td>\n1<\/span><\/td>\n36<\/span><\/td>\n500<\/span><\/td>\n<\/tr>\n
Undervaluation Percentile\u00a0<\/span><\/td>\n3<\/span><\/td>\n53<\/span><\/td>\n82<\/b><\/td>\n12<\/span><\/td>\n25*<\/span><\/td>\n30*<\/span><\/td>\n<\/tr>\n
P\/B Ratio<\/span><\/td>\n10.5<\/span><\/td>\n2.9<\/span><\/td>\n1.3<\/b><\/td>\n10.9<\/span><\/td>\n4.0<\/span><\/td>\n3.8<\/span><\/td>\n<\/tr>\n
P\/E Ratio<\/span><\/td>\n107.3<\/span><\/td>\n25.4<\/span><\/td>\n106.7<\/span><\/td>\n18.4<\/b><\/td>\n34.3<\/span><\/td>\n18.6<\/span><\/td>\n<\/tr>\n
P\/S Ratio<\/span><\/td>\n12.5<\/span><\/td>\n1.4<\/b><\/td>\n1.5<\/span><\/td>\n2.1<\/span><\/td>\n2.9<\/span><\/td>\n2.5<\/span><\/td>\n<\/tr>\n
Div. Yield<\/span><\/td>\n0.0%<\/span><\/td>\n1.2%<\/span><\/td>\n0.0%<\/span><\/td>\n2.4%<\/b><\/td>\n0.9%<\/span><\/td>\n1.6%<\/span><\/td>\n<\/tr>\n
Expense Ratio<\/span><\/td>\nN\/A<\/span><\/td>\nN\/A<\/span><\/td>\nN\/A<\/span><\/td>\nN\/A<\/span><\/td>\n0.39%<\/span><\/td>\n0.03%<\/b><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

* ETF Undervaluation # is the percentage of undervalued stocks, not a comparison with all other ETFs in our universe3<\/span><\/i><\/p>\n

Financial Advisory Services based on ValuEngine research available: \u00a0 <\/b>www.ValuEngineCapital.com<\/b><\/a><\/h5>\n

Analysis<\/b>\u00a0\u00a0<\/span><\/p>\n