As bellicose rhetoric grow more vociferous for greater action in the Middle East, investors may turn to the aerospace and defense industry and sector-related exchange traded funds to capitalize on the increased government spending.
Over the past three months, the iShares U.S. Aerospace & Defense ETF (NYSEArca: ITA) rose 9.5%, PowerShares Aerospace & Defense Portfolio (NYSEArca: PPA) increased 10.3% and SPDR S&P Aerospace & Defense ETF (NYSEArca: XAR) gained 6.3%.
Aerospace and defense stocks have been gaining momentum as the public and western governments step up the fight against the Islamic State, especially after the Paris attacks, reports Gemma Acton for CNBC.
French President François Hollande and Belgian Prime Minister Charles Michel have pledged to put more into fighting the terrorist group while U.K. Prime Minister David Cameron vowed to “build the case” for military intervention in Syria.
Consequently, analysts believe the heightened state of alert will help companies in the security industry, such as gunship manufacturer Northrop Grumman (NYSE: NOC) and fighter jet builder Lockheed Martin (NYSE: LMT).
For instance, Prime Minister Cameron has already added $12. billion to the budget for the purchase of military equipment, which includes allocations to acquire Lockheed Martin “F-35” jets, according to Profit Confidential. The Italian government has also confirmed it will take 90 F-35s for a total value of about $14 billion.
Northrop Grumman makes up 5.6% of ITA, 4.6% of PPA and 3.8% of XAR. Lockheed Martin accounts for 7.1% of ITA, 6.3% of PPA, 3.7% of XAR.