{"id":3503,"date":"2025-06-17T19:25:50","date_gmt":"2025-06-17T19:25:50","guid":{"rendered":"http:\/\/blog.valuengine.com\/?p=3503"},"modified":"2025-06-17T19:32:41","modified_gmt":"2025-06-17T19:32:41","slug":"israel-takes-on-iran-is-it-time-for-defense-stocks-and-etfs","status":"publish","type":"post","link":"http:\/\/blog.valuengine.com\/index.php\/israel-takes-on-iran-is-it-time-for-defense-stocks-and-etfs\/","title":{"rendered":"Israel Takes on Iran – Is It Time for Defense Stocks and ETFs?"},"content":{"rendered":"

The S&P 500 Index had been up nearly 1 percent after the first four days of trading this week.\u00a0 Israel\u2019s attacks on strategic targets in Iran followed by Iran\u2019s counterattack changed the narrative as the selloff Friday wiped out those gains sufficiently to throw that benchmark into negative territory for the week.\u00a0 It can be argued that where some investors were concerned, the market had been on too much of a run not sufficiently supported by stock market fundamentals to support such lofty valuations.\u00a0 Given this perspective, any excuse for a sell-off was a good one for nervous investors.\u00a0 Most analysts, however, think that Friday\u2019s jitters were more directly a product of the added uncertainty brought by air strikes that may be a prelude to greater global conflict or perhaps even war.\u00a0<\/span><\/p>\n

All 5,200+ stocks US and Canadian stocks, 16 sector groups, 200+ industries, and 700+\u00a0 ETFs have been updated.\u00a0 Two-week free trial available:<\/b> www.ValuEngine.com<\/b><\/a><\/h5>\n

Of course, not all stocks and equity ETFs were down on Friday.\u00a0 Given the Middle East area of conflict, oil and related energy stocks performed well and, of course, gold rose more than 1%. The other positive area is defense as one might expect amidst the drumbeats of war. Many defense stocks and ETFs were in positive territory in anticipation that demand could skyrocket.\u00a0 Well-known stalwarts of the defense industry such as RTX Corp., Lockheed Martin, General Dynamics, Northop Grumman, and L3Harris all finished well into the green with gains of more than 2% each.\u00a0\u00a0<\/span><\/p>\n

Defense ETFs also performed well, but not generally as well. Many of the stocks in these ETFs are related to aerospace and technology suppliers, not directly related to defense and munitions.\u00a0 Currently, ETFdb.com, a VettaFI company, classifies 6 ETFs as Aerospace \/ Defense Industry ETFs.\u00a0 They are as follows:<\/span><\/p>\n

iShares U.S. Aerospace & Defense ETF <\/span>(ITA)<\/b> tracks a market-cap-weighted index of U.S. aerospace and defense stocks. Due to the industry’s nature, the fund is highly concentrated and non-diversified, despite \u201ccapping\u201d holdings for diversification purposes.<\/span><\/p>\n

Invesco Aerospace & Defense ETF<\/span> (<\/span>PPA)<\/b> seeks to track the SPADE\u00ae Defense Index, which includes companies involved in US defense, homeland security, and aerospace operations. Like <\/span>ITA<\/b>, it uses a modified market-cap-weighting methodology<\/span><\/p>\n

SPDR S&P Aerospace & Defense ETF<\/span> (<\/span>XAR<\/b>) aims to mirror the performance of the S&P Aerospace & Defense Select Industry Index by investing in aerospace and defense stocks with a target allocation across large, mid, and small-cap companies using a modified equal-weighting methodology. The selection set is the S&P 1500 Total US Market Index.\u00a0<\/span><\/p>\n

Global X Defense Tech ETF <\/span>(<\/span>SHLD<\/b>) tracks an index of U.S.-listed companies innovating in future security, such as cybersecurity, advanced border security, and military technologies like robotics, drones, and space technology. It invests at least 80% of its assets in the securities of its underlying index.<\/span><\/p>\n

First Trust Indxx Aerospace & Defense ETF<\/span> (<\/span>MISL<\/b>): This ETF aims to match the performance of the Indxx US Aerospace & Defense Index, which focuses on US companies in both advanced and traditional aerospace and defense.\u00a0<\/span><\/p>\n

SPDR S&P Kensho Future Security ETF<\/span> (FITE) seeks to track the performance of the S&P Kensho Future Security Index. This index includes U.S.-listed companies involved in <\/span>future security areas<\/span><\/i> like cybersecurity, advanced border security, and military applications such as robotics and space technology.\u00a0<\/span><\/p>\n

Current ValuEngine reports on all covered stocks and ETFS can be viewed<\/b> HERE<\/b><\/a><\/h5>\n

This chart gives a quick rundown of current attractiveness, size, price performance and dividend yield of these ETFs. <\/span>SPLG<\/b>, the S&P 500 ETF with the lowest expense ratio, is used to provide a benchmark for the aerospace\/defense industry ETF\u2019s returns.\u00a0\u00a0<\/span><\/p>\n

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Current ValuEngine reports on all covered stocks and ETFS can be viewed<\/b> HERE<\/b><\/a><\/p>\n

The bold print indicates the ETF that performed best in that particular category.\u00a0 It is immediately apparent that <\/span>SHLD<\/b>, the Global X Defense Tech ETF, led all of the other ETFs in performance on Friday June 13 in the wake of the Israeli initial attack on Iran\u2019s nuclear weapons. <\/span>SHLD <\/b>gained almost 2% for the day, while the S&P 500 Index was down more than 1%.\u00a0 Three of the other five ETFs were also up on the day.\u00a0 <\/span>MISL <\/b>from First Trust also had a healthy 1%+ gain.\u00a0 The exceptions were equally weighted <\/span>XAR<\/b> and <\/span>FITE.\u00a0 <\/b>The latter<\/span> is as much a security technology portfolio as it is a defense portfolio.\u00a0\u00a0\u00a0<\/span><\/p>\n

SHLD <\/b>outperformed\u00a0 everything on this table in 2025 with a staggering 58.6% year-to-date.\u00a0 It also dwarfs the competition in the shorter periods. However, it has existed for a bit less than three years, so it has not been as time-tested as the other ETFs in this study.\u00a0 Also, its portfolio holdings include more than 50% of its assets invested in non-US securities.\u00a0 For example, the largest holding at nearly 9% of the ETF\u2019s portfolio is Rheinmetall AG, a leading global provider of military vehicles, weapons, ammunition, and air defense systems. Two other foreign stocks that have large allocations are France-based aerospace giant Thales S. A. and Italy-based Leonardo S .p. a.\u00a0 Many American stalwarts are also in <\/span>SHLD<\/b> including Palantir (<\/span>PLTR)<\/b>, RTX Corp. <\/span>(RTX), <\/b>Northrop Grumman (<\/span>NOC<\/b>) and General Dynamics (<\/span>GD). <\/b>\u00a0The last three are also held by <\/span>ITA <\/b>and\u00a0 <\/span>XAR<\/b>.\u00a0 The reason I delve into <\/span>SHLD <\/b>so deeply beyond its performance is that there is no ValuEngine report available on it. This is because so many holdings in\u00a0 its portfolio are stocks we do not cover, although in many cases, we may cover an ADR of the same company.\u00a0 This ETF has probably latched onto two current market themes.\u00a0 The first is that thus far, this Administration has seen a persistent weakening in the dollar vs. other currencies. That benefits US holders of foreign stock and\/or their ADRs.\u00a0 The second reason is that many countries, especially in Europe, are threatened by the President\u2019s comments about potentially pulling out of NATO.\u00a0 The implication is that our European allies need to pour a lot more resources into their own defense industries and the companies that serve it.\u00a0 Such investments may contribute to foreign defense technology companies outpacing their US counterparts.\u00a0 Investors interested in these themes may wish to do their own homework on <\/span>SHLD.\u00a0\u00a0<\/b><\/p>\n

Financial Advisory Services based on ValuEngine\u2019s research models: <\/b>www.ValuEngineCapital.com<\/b><\/a><\/h5>\n

Back to the ETFs we do rate that hold mostly US stocks. T The 5-year performance leader, outpacing the S&P 500 for four of the five periods measured, everything but one-month, is Invesco Aerospace and Defense ETF (<\/span>PPA).\u00a0 <\/b>It is the second largest of the six ETFs in the study in terms of assets under management (AUM). It surpassed the S&P 500 in 3 of the five historical periods. Our predictive models predict these ETFs to generally keep pace with the market which is why almost all of them are ranked <\/span>3 <\/b>(Hold) with equally weighted <\/span>XAR <\/b>being rated <\/span>2 <\/b>(Sell).\u00a0 That said, <\/span>XAR <\/b>does have 4 individual stocks rated <\/span>4 <\/b>(Buy) in its top 10 holdings.\u00a0 These include:<\/span>Rocket Lab (<\/span>RKLB<\/b>), Howmet Aerospace (<\/span>HWMT<\/b>), Kratos Defense (<\/span>KTOS<\/b>) and GE Aerospace (<\/span>GE).\u00a0 <\/b>Even more outstanding to our eyes is that the top nine holdings of <\/span>FITE<\/b>, more based on defense technology and security than traditional aerospace, are all rated as Buy or Strong Buy by ValuEngine.\u00a0 Of note in this list are: CloudFare (<\/span>NET<\/b>), <\/span>\u00a0<\/b>Planet Labs PBC (<\/span>PL<\/b>), Rubrik (<\/span>RBRK<\/b>), Zscaler (<\/span>ZS<\/b>) and Broadcom (<\/span>AVGO<\/b>).\u00a0\u00a0<\/span><\/p>\n

One sour note is that ETF providers consider these indexes to be non-standard specialty items that require more attention than sector indexes.\u00a0 Consequently, these are all a lot more expensive than the 0.09% expense ratio investors pay for the 11 Select Sector SPDRs from State Street.\u00a0 The range of ratios here is from 0.35% to 0.60%.\u00a0 As usual, if you get alpha, homing in on this special area within the Industrial Sector may turn out to be worth it but there\u2019s never a guarantee of getting the value you are paying for.\u00a0\u00a0<\/span><\/p>\n

_____________________________________________________________________<\/span><\/p>\n

By Herbert Blank<\/b><\/h5>\n
Senior Quantitative Analyst, ValuEngine Inc ( <\/span>www.ValuEngine.com<\/span><\/a> )<\/span><\/h5>\n
support@ValuEngine.com<\/span><\/h5>\n
(321) 325-0519<\/span><\/h5>\n
All the over 4,200 stocks, 16 sector groups, over 250 industries, and 600 ETFs have been updated on<\/span> www.ValuEngine.com<\/span><\/a><\/h5>\n
Financial Advisory Services based on ValuEngine research available through<\/span> ValuEngine Capital Management, LLC<\/span><\/a><\/h5>\n
Free Two-Week Trial to all 5,000 plus equities and ETFs covered by ValuEngine<\/span> HERE<\/span><\/a><\/h5>\n
Subscribers log in <\/span>HERE<\/span><\/a><\/h5>\n","protected":false},"excerpt":{"rendered":"

The S&P 500 Index had been up nearly 1 percent after the first four days of trading this week.\u00a0 Israel\u2019s attacks on strategic targets in Iran followed by Iran\u2019s counterattack changed the narrative as the selloff Friday wiped out those gains sufficiently to throw that benchmark into negative territory for the week.\u00a0 It can be … Read more<\/a><\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[130,39],"tags":[2613,2611,2612,2615,2609,1731,1145,2614,2115,2608,2606,2610,1713,213,1659,63,2607],"_links":{"self":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts\/3503"}],"collection":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/comments?post=3503"}],"version-history":[{"count":5,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts\/3503\/revisions"}],"predecessor-version":[{"id":3509,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts\/3503\/revisions\/3509"}],"wp:attachment":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/media?parent=3503"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/categories?post=3503"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/tags?post=3503"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}