Quality exposure in 2021 is a must given there’s still a lot of market uncertainty amid the Covid-19 pandemic. One area of value that ETF investors may want to focus on is an aerospace and defense play via ETFs like the iShares U.S. Aerospace & Defense ETF (ITA) .
Source: An ETF For Quality Exposure in Aerospace and Defense
Quality exposure in 2021 is a must given there’s still a lot of market uncertainty amid the Covid-19 pandemic. One area of value that ETF investors may want to focus on is an aerospace and defense play via ETFs like the iShares U.S. Aerospace & Defense ETF (ITA).
ITA seeks to track the investment results of the Dow Jones U.S. Select Aerospace & Defense Index composed of U.S. equities in the aerospace and defense sector.Aerospace companies in the index include manufacturers, assemblers and distributors of aircraft and aircraft parts.
The fund rose 14% the past 3 months and in order to gauge momentum, we can apply some technical analysis filters. This can also help confirm a buying opportunity brewing for ITA.
The fund saw some heavy selling volume in the January 4 trading session, which could spell an opportunity for buyers looking to get in a value-added price. The low it reached, $90.44, is just hovering above its 50-day moving average.
When applying a relative strength index (RSI) filter, the fund is below overbought levels. Furthermore, using a moving average convergence divergence (MACD) filter, the exponential moving average (EMA) line is below its signal line.
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Typically, you want to wait for that EMA line to cross up before buying. However, if you’re looking for a long-term play nonetheless and still want to diversify your portfolio in the A&D sector, ITA can do just that.
Living Large With ITA
The fund skews more towards large cap companies, which is what you typically want when diving for quality. With a lot of market uncertainty still lingering, large caps can help mute the effects of a downturn better than their small cap brethren.
“Equities in ITA’s portfolio are primarily large-cap stocks with a competitive advantage over its smaller peers,” wrote Michael Gayed in Seeking Alpha. “These stocks are likely to benefit from the long-term growth trend in the aerospace & defense industry. Hence, investing in this fund could be a good bet for investors with a long-term investment horizon.”
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“Companies operating in this sector are usually rather large and slow-growing,” he added. “Given that much of their business comes from long-term government contracts, these companies are considered relatively stable. Given that U.S. Government military spending is expected to increase in the coming years, ITA could prove to be a viable choice for exposure to this sector.”
For more news and information, visit the Equity ETF Channel.