Defense stocks provided haven in market's swoon

Posted by: Aaron Pressman on September 27, 2007

The war in Iraq grinds on and now President Bush is looking for a big increase in defense spending. There’s an obvious beneficiary in the land of exchange-traded funds, as Tom Lydon points out over on ETF Trends.

The PowerShares Aerospace & Defense Fund (Symbol: PPA) is hitting a new high today, putting it up 27% for the year. Comprised of 55 defense industry stocks, ranging from stalwarts like Boeing (BA) and Lockheed Martin (LMT) to smaller fish like Trimble Navigation (TRMB) and DRS Technologies (DRS), the fund offers a diversified index-based way to play the trend.

Obviously, it’s a sector that’s unaffected by problems in subprime lending or fears about a consumer spending slowdown. And it held up well over the summer, even better than other popular “defensive” sectors like health care. Investment adviser Gary Gordon pointed out the other day that even with the sector’s recent run-up, valuations look reasonable.

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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