Industrial ETFs, including the Industrial Select Sector SPDR (NYSEArca: XLI), have been stymied on multiple fronts. In no particular order, tumbling oil prices have pinched demand for oil services provided by some large- and mega-cap industrial names, such as Dow component General Electric (NYSE: GE), also XLI’s largest holding.
On a related note, slack commodities demand has been a drain railroad operators, an industry group that accounts for nearly 10% of XLI’s weight. And in a perversion of historical trends, airline stocks have not been responsive to oil’s slump and that industry is 5% of XLI’s weight. The good news is that airlines have popped over the past month, but XLI is going to need more help. [Airline ETF Ready to Soar]
“But for the typical investor, one of my favorite strategies is buying newly emerging stocks in strong groups. There are plenty of these setups in the defense sector,” adds Barron’s.
iShares U.S. Aerospace & Defense ETF
