This research report was produced by Colorado Wealth Management Fund, Founder of The Mortgage REIT Forum, with assistance from Big Dog Investments. <\/p>\n
Which sector has dominated? <\/p>\n<\/p>\n
The PowerShares Aerospace & Defense Portfolio ETF (NYSEARCA:PPA) is invested in the industrial sector which has been dominating for a while now. The returns have come with a lot of volatility, which along with current market valuations is why I would not want to be starting a position in this fund. That's not to say it isn't good and hasn't performed well - it's just valued too high. The underlying index for PPA is the SPADE Defense Index. <\/p>\n
I'll be focusing on analyzing the ETF. The market is priced too high right now and so is this fund. This is probably one of the best times to take a look at funds and decide which ones should go on a watch list for when the market takes a dive. <\/p>\n
Expenses <\/p>\n
The expense ratio right now is at .64%. Compared to the equity ETFs I have been covering, this is on the expensive side. I wouldn't be comfortable paying an expense ratio this high, but every investor has a different tolerance level. What I would be willing to do is take the holdings of this company and simulate its results. <\/p>\n
Yield <\/p>\n
The current yield is .90%, which may not be high enough for a lot of investors going for a dividend yield. The growth of this fund has more than made up for a small yield if an investor had a long-term investment approach. <\/p>\n
Risk profile <\/p>\n
Let's take a look at how volatile this fund has been. <\/p>\n<\/p>\n
Since the inception of the fund on October 26, 2005, there has been total returns of 239.8% compared to SPY's returns of 152.9%. These returns are fantastic, but look at the volatility: <\/p>\n
PPA: <\/p>\n
SPY: <\/p>\n
Yes, the great returns have been there, but the fund has shown more volatility and a larger drawdown than SPY since it started. This is the kind of volatility it sometimes takes to beat SPY. I prefer to allocate my funds more defensively. Consumer staples has been my go-to choice when it comes to looking at ETFs, but there's been other sectors like industrial which has done very well. <\/p>\n
Even over the last couple of years PPA has done amazing. <\/p>\n
PPA: <\/p>\n
SPY: <\/p>\n
Sector <\/p>\n
Here are the sector holdings from the Morningstar website: <\/p>\n<\/p>\n
There is only a tiny bit of diversification, and the rest of the fund is in industrials. This sector has done quite well over the last decade, but that doesn't mean it will continue to do so. I worry about investing in any sector when all the money is flooding there. <\/p>\n<\/p>\n
Holdings <\/p>\n
Here's a chart of the top 30 holdings: <\/p>\n
Ticker <\/p>\n
Name <\/p>\n
Allocation <\/p>\n
Div Yield <\/p>\n
(NYSE:GD) <\/p>\n
General Dynamics Corp. <\/p>\n
7.02% <\/p>\n
1.66% <\/p>\n
(NYSE:UTX) <\/p>\n
United Technologies Corp. <\/p>\n
7.01% <\/p>\n
2.17% <\/p>\n
(NYSE:HON) <\/p>\n
Honeywell International, Inc. <\/p>\n
6.89% <\/p>\n
2.00% <\/p>\n
(NYSE:LMT) <\/p>\n
Lockheed Martin Corp. <\/p>\n
6.83% <\/p>\n
2.57% <\/p>\n
(NYSE:BA) <\/p>\n
Boeing Co.\/The <\/p>\n
6.82% <\/p>\n
3.04% <\/p>\n
(NYSE:RTN) <\/p>\n
Raytheon Co. <\/p>\n
5.64% <\/p>\n
1.95% <\/p>\n
(NYSE:NOC) <\/p>\n
Northrop Grumman Corp. <\/p>\n
5.30% <\/p>\n
1.40% <\/p>\n
(NYSE:TDG) <\/p>\n
TransDigm Group, Inc. <\/p>\n
3.89% <\/p>\n
0.00% <\/p>\n
(NYSE:COL) <\/p>\n
Rockwell Collins, Inc. <\/p>\n
3.85% <\/p>\n
1.23% <\/p>\n
(NYSE:TXT) <\/p>\n
Textron, Inc. <\/p>\n
3.59% <\/p>\n
0.17% <\/p>\n
(NYSE:LLL) <\/p>\n
L3 Technologies, Inc. <\/p>\n
3.56% <\/p>\n
1.79% <\/p>\n
(NYSE:HII) <\/p>\n
Huntington Ingalls Industries, Inc. <\/p>\n
2.50% <\/p>\n
1.22% <\/p>\n
(NYSE:HEI) <\/p>\n
HEICO Corp. <\/p>\n
1.72% <\/p>\n
0.19% <\/p>\n
(NYSE:OA) <\/p>\n
Orbital ATK, Inc. <\/p>\n
1.64% <\/p>\n
1.26% <\/p>\n
(NASDAQ:ESLT) <\/p>\n
Elbit Systems Ltd. <\/p>\n
1.42% <\/p>\n
1.32% <\/p>\n
(NYSE:BWXT) <\/p>\n
BWX Technologies, Inc. <\/p>\n
1.33% <\/p>\n
0.78% <\/p>\n
(NYSE:OSK) <\/p>\n
Oshkosh Corp. <\/p>\n
1.32% <\/p>\n
1.29% <\/p>\n
(NYSE:HXL) <\/p>\n
Hexcel Corp. <\/p>\n
<\/p>\n
Originally posted here: <\/p>\n
Aerospace Soars Past S&P 500 - Seeking Alpha<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" This research report was produced by Colorado Wealth Management Fund, Founder of The Mortgage REIT Forum, with assistance from Big Dog Investments. Which sector has dominated? Continue reading