STOXX Europe Aerospace & Defense ETF (EUAD)
BATS BATS Primary Summary
EUAD Chart
EUAD: Incursions In EU Highlight Need For Drone Defense And Rearmament
The Select STOXX Europe Aerospace & Defense ETF is well-positioned to benefit from Europe's increasing focus on drone warfare and defense spending. Recent drone incursions and calls for a European 'drone wall' could drive significant demand for anti-drone technology, benefiting EUAD's holdings. EUAD is fairly valued compared to U.S. peers but offers a higher potential upside if European military spending materializes.
EUAD: Entering A NATO Super Cycle
I rate EUAD a Buy as Europe's defense sector enters a super cycle driven by NATO's increased spending to 3.5% of GDP. EUAD offers convenient, concentrated exposure to top European defense names, with a 12% upside potential plus a 1% dividend yield. Consensus forecasts 20% annual earnings growth with a reasonable 1.3x PEG ratio versus US peers at 2x.
Moves To Bolster Defense In Europe Will Bolster EUAD In Your Portfolio
Select STOXX Europe Aerospace & Defense ETF is well-positioned to benefit from Europe's defense spending increases, driven by geopolitical tensions and a renewed focus on security. Drones and cybersecurity are key growth areas, with holdings like Airbus, BAE Systems, and Thales poised to capitalize on evolving warfare trends. EUAD offers geographic diversification and exposure to both traditional and emerging defense technologies, balancing risk and opportunity.
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STOXX Europe Aerospace & Defense ETF Profile
| BATS Exchange | United States Country |
Overview
The fund described is a specialized investment vehicle that dedicates the majority of its assets, at least 80%, to securities within an index representing companies in the aerospace and defense sectors. This encompasses a broad range of enterprises primarily based in Europe, involved in various aspects of the aerospace and defense industry. These companies are engaged in manufacturing, servicing, supplying, and distributing a wide array of products and services. The index aims to mirror the market performance of these entities, offering investors targeted exposure to the aerospace and defense sectors. The fund is characterized as non-diversified, meaning it may invest a larger portion of its assets in fewer securities, potentially increasing the fund's volatility and risk.
Products and Services
- Civil and Military Aerospace Equipment
This category encompasses a wide range of products designed for both civil aviation and military applications. It includes aircraft for passenger and cargo transportation, as well as various types of military aircraft used for defense and combat purposes. The fund invests in companies involved in the design, manufacture, and maintenance of these aerospace vehicles, targeting those at the forefront of aviation technology and innovation.
- Aerospace Systems and Technology
Under this category fall products and services related to the technologies and systems that enable the functioning and enhancement of aerospace capabilities. This includes navigation, communication, and propulsion systems, among others, vital for the operation of civil and military aircraft. The fund focuses on companies that lead in the research, development, and implementation of these advanced aerospace technologies.
- Civil and Military Defense and Protective Services Equipment
This area covers a broad spectrum of products aimed at ensuring the safety and security of nations and their citizens. It ranges from personal protective equipment for military personnel to large-scale defense systems designed to protect against various threats. The fund's investment extends to companies specializing in the latest defense technologies and services, including surveillance, intelligence gathering, and cybersecurity solutions tailored to military specifications.
- Technology, Systems, and Services
Beyond the manufacture of physical products, the fund also invests in companies offering related technology services and systems critical to the aerospace and defense sectors. This includes software for simulation and training, systems integration services, and maintenance and repair operations (MRO). By including these service-oriented companies, the fund diversifies its portfolio across a broader spectrum of the aerospace and defense industry's value chain.
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