Defense Stock ETFs: ITA and PPA

Defense stocks/companies have been getting a bunch press lately, analysts are divided on a bullish or bearish view. However rather then pick individual companies, you can go with the two big Defense Fund ETFs.

Your ammunition is the iShares Dow Jones US Aerospace & Defense Fund (NYSE:ITA) and the PowerShares Aerospace & Defense Fund (NYSE:PPA), here's how they are trading today and the overall fundamentals:

Both of these ETFs have recently recovered from their 52-week lows since March.  Will there be more defense spending as President Obama tries to stimulate our U.S. economy or will there be more cuts then gains? Is there a reason to pick up these ETFs now or just play the stocks?

U.S. Defense Secretary Robert Gates said this week the Defense Department wanted to cut funding for the company's F-22 Raptor while boosting spending for its F-35 Joint Strike Fighter. Gates wants a new agenda for defense spending which is focused on updating the systems that keep defense plants running. This could help or hurt related ETFs, depending on how the money is spent.  Some companies may get new contracts, some may get cut, however if more money is being thrown then pulled, this could benefit the overall picture:

The PPA is made up of the following top holdings:

Fund Holdings subject to change   Lockheed Martin Corp.   7.79%   United Technologies Corp.   7.62%   Boeing Co.   7.27%   Honeywell International Inc.   7.03%   General Dynamics Corp.   5.49%   As of 4/7/2009		Raytheon Co.   5.34%   Northrop Grumman Corp.   4.90%   L-3 Communications Holdings Inc.   4.07%   SAIC Inc.   3.98%   Precision Castparts Corp.   3.84%

The ITA is made up of the following:

If anything, the ETFs may be the easier play then trying to figure out which company may benefit, however on the flip side if these same companies are going to lose out, then why even bother?

At this point, I would recommend putting the ITA and PPA on your watch list and if more positive press comes out on the defense sector then your decision becomes easier to make. 

Happy Safe Investing.