The aerospace and defense trade is luring investors deep into space, and exchange-traded funds (ETFs) want a piece of it.
VettaFi’s Cynthia Murphy told CNBC’s “ETF Edge” this week that more and more ETFs are addressing space themes directly. Procure space ETF (UFO) An example is the Global X Defense Tech ETF (SHLD).
“It includes elements of cybersecurity, such as satellites, communications and navigation. So the theme of defense is actually a very diverse topic today. There are a lot of interesting names,” said the company’s research director. “Actually, that’s not all. lockheed martin Some of the traditional names found in ITA (iShares U.S. Aerospace & Defense ETF). ”
As of Thursday’s close, the Procure Space ETF is up about 19% since the Iran war began on February 28, while the Global X Defense Tech ETF is down 8%.
Meanwhile, the more traditional iShares U.S. Aerospace & Defense ETF fell 10% over the same period. Its website lists its top holdings as follows: ge aerospace, RTX Corporation and boeing.
Murphy expects investor interest in aerospace and defense stocks to continue long after the Iran war is resolved.
“Every time geopolitical heat rises, these kinds of themes come up on the map,” Murphy said. “But this is another big growth area because there are so many new technologies coming into this space and so much investment being made, with many governments pledging even more investment over the next five to 10 years.”
Murphy said the historic interest in SpaceX’s initial public offering, which was largely expected in June, suggests further interest in space.
“One of the things we’ve talked about most this year is space exploration and space investment, given the upcoming SpaceX IPO,” Murphy added.
SS&C TechnologiesPaul Baiocchi is also bullish on aerospace and defense names. He predicts that the monster increases in defense budgets around the world will surely benefit the group.
“These are all coming together for the same limited and scarce resource,” said the head of fund sales and strategy at a financial technology company in the same interview. “Short-term, medium-term (and) long-term commodity allocation, energy infrastructure (and) electrification infrastructure will all benefit from significant investment from both the public and private sectors.”
Additionally, he sees artificial intelligence playing a key role.
“The bottleneck for AI may be the chips, but it’s also the raw materials used in power, transmission and construction,” Baiocchi said. “When you look at defense, the availability of rare earths is also part of the constraint.”
