The last full trading week of March capped off a contentious month as the coronavirus pandemic upended the markets with a fear-fueled equities sell-off. There were some winners that week and one of those victorious was a leveraged aerospace and defense exchange-traded fund, which saw a 66% gain.
That fund was none other than the Direxion Daily Aerospace & Defense 3X Shares ETF (NYSEArca: DFEN). DFEN seeks daily investment results equal to 300% of the daily performance of the Dow Jones U.S. Select Aerospace & Defense Index, which attempts to measure the performance of the aerospace and defense industry of the U.S. equity market.
The federal coronavirus stimulus package was a major benefactor for many sectors, including aerospace and defense. In particular, it was a boon for the airline industry, which saw its revenues in a world of hurt with travel restrictions in place.
“Surging 66% in the week in question, the Direxion Daily Aerospace & Defense Bull 3X Shares ETF (DFEN) staged possibly the biggest rebound of any of the other leveraged funds offered by the provider,” a Direxion Investments “X-Change” article noted. “It’s fair to pin the cause of this surge squarely on the shoulders of the coronavirus relief package passed by Congress, which included a $60B bailout of the fledgling airline industry. This helped push shares of major component Boeing Co. higher by 70% and bolstered other contractors like Lockheed Martin Corporation and United Technologies Corporation.”
“At the moment, traders are keen to profit from this record-breaking injection of cash into the economy,” the post added. “However, with literally trillions of dollars now part of the government’s balance sheet, the defense sector may be in for a lofty hangover once it comes time to cover those costs.”
For additional, non-leveraged broad plays in the aerospace and defense industry, here are a pair ETFs to consider:
- iShares U.S. Aerospace & Defense ETF (BATS: 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
- Invesco Aerospace & Defense Portfolio (NYSEArca: PPA): PPA seeks to track the investment results of the SPADE® Defense Index, which was composed of common stocks of 54 U.S. companies whose shares are listed on the New York Stock Exchange (“NYSE”) or the NASDAQ. These companies are engaged principally in the development, manufacture, operation, and support of U.S. defense, military, homeland security, and space operations.
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