Historical trading trends make for interesting conversation and reading, but it’s even better when the asset class in question obliges and repeats bullish trends.
Among the most often referenced trends is seasonality, or the propensity of some assets to perform well or poorly at various times of the year. That includes stocks performing better in some months than they do in others. Interestingly, there are sector and industry trends to consider on this front.
On that note, the Invesco Aerospace & Defense ETF (PPA) could be a winner among industry exchange traded funds in February. The reasoning behind that assertion is simple: Several of PPA’s 56 holdings are among the best-performing S&P 500 components over the past decade. That group includes Raytheon (NYES:RTX), the ETF’s second-largest holding at a weight of 6.72%, as of February 3.
“According to Schaeffer’s Senior Quantitative Analyst Rocky White, Raytheon Technologies stock sports an average return of 3.8% in the month of February over the last 10 years, and finished the month higher eight times. That’s good for not only second-best among Dow members, but second amongst defense stocks,” noted Schaeffer’s Investment Research.
As the research firm noted, Raytheon is merely the second-best aerospace and defense name on a historical basis in the month of February. Top honors go to Huntington Ingalls Industries (NYSE:HII). Over the past 10 years, Huntington Ingalls Industries averaged a February gain of 6.29%, which is good for second-best among S&P 500 constituents. Good news for investors considering PPA: That stock accounts for 2.03% of the ETF’s roster.
Regarding Raytheon, the stock’s options prices imply that the shares aren’t likely to be too volatile over the near term, which could be of note to risk-averse investors considering PPA.
“It’s also worth pointing out that the equity ranks low on the Schaeffer’s Volatility Scorecard (SVS), with a score of just 14 out of 100. In other words, the security has consistently realized lower volatility than its options have priced in, making the stock a potential premium-selling candidate,” according to Schaeffer’s.
Dow component Boeing (NYSE:BA) and Northrop Grumman (NYSE:NOC), which combine for 13% of the PPA portfolio, join Raytheon and Huntington Ingalls Industries as the aerospace and defense names that rank among the best-performing S&P 500 members over the past decade.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.