Aerospace and defense-related ETFs have been breaking into new all time highs, and the sector theme may continue to have legs.
Year-to-date, the iShares U.S. Aerospace & Defense ETF (BATS: ITA) increased 16.2%, PowerShares Aerospace & Defense Portfolio (NYSEArca: PPA) advanced 14.9% and SPDR S&P Aerospace & Defense ETF (NYSEArca: XAR) jumped 21.0%.
The aerospace and defense sector-related ETFs touched all-time highs early Wednesday but slightly pulled back later in the day.
“As a trader, you never ignore all-time highs. That’s usually a very, very strong bullish signal that suggests the market is feeling very positive about long-term trends,” Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management, told CNBC.
Raytheon A Strong Play
Schlossberg singled out Raytheon (NYSE: RTN) as a strong play in the sector due to the broader defense trend. The analyst argued that the defense company is performing well on the bottom and top lines as well as growing dividends.
“For an investor who’s looking for long-term capital appreciation with dividend growth, I think this presents a very interesting trade in the defense sector,” Schlossberg said.
RTN makes up 5.8% of ITA’s underlying holdings, 5.5% of PPA and 3.1% of XAR.
Related: Aerospace ETFs Can Take Flight Again
Matt Maley, equity strategist at Miller Tabak, pointed out that a technical analysis of Raytheon reveals the company may have more room to run.
“Over the summer, it broke above its multimonth trend line, so that’s positive. But more importantly, it had been bumping up against its 200-day moving average most of the summer, couldn’t break above it, and it finally has just in the last week or two,” Maley told CNBC.
The broader aerospace and defense ETFs have been trading well above their long-term trend lines since testing their support back in late June. Maley believed that the group is also starting to break out in a more substantial way than it had even just a few weeks ago.
For more information on the aerospace industry, visit our aerospace & defense category.