The iShares U.S. Aerospace & Defense ETF is up 191% over the past 10 years but has been relatively flat over the past 5 years. YTD, ITA is down ~8%.

However, much of that underperformance is a result of the global pandemic and the trials & tribulations of one company: Boeing. Arguably, the worst may be behind that company. As a result, the U.S. aerospace & defense sector appears to be a timely bid to allocate some private capital. Today, I'll take a close look at the ITA ETF to see if it might be a good way for investors to gain exposure to the D&A sector going forward.

The iShares U.S. Aerospace & Defense ETF (ITA) enjoys a decent 10-year performance track record (averaging at a 12.2% annualized total return), but has significantly lagged behind the broad S&P500 over the past 5-years. However, much of ITA's under-performance is a result of the global pandemic impact on global commercial aviation and the terrible performance by one of its major holdings: Boeing (BA), which is down ~50% over the past 5-years. Given precarious situation in Eastern Europe (and war in Ukraine doesn’t limit the whole picture), we shouldn’t forget about the renewed China/Taiwan worries, as well as the recent U.S. President Biden’s CHIP Act severely countering China, and there is no doubt that the world has become a much more dangerous place.

Back in May, the New York Times reported that the U.S. had spent $54 billion on assistance to Ukraine. Of that total (which included economic, humanitarian, and healthcare aid), an estimated $31.3 billion was targeted to military, weapons & defense supplies, and military intelligence related spending. In August, Reuters reported that the U.S. was sending an additional $5.5 billion in aid to Ukraine - $1 billion of which was targeted for military assistance. Last month, The Intercept_ reported that President Biden has asked Congress for an additional $13.7 billion for Ukraine, much of which is very likely to go toward military related weapons, supplies, and intelligence. Clearly, much of the spending for Ukraine's defense (and more recently, offense...) is going to funnel to the U.S. defense & aerospace companies.

Indeed, in April the Stockholm International Peace Institute reported that global military expenditure recently passed $1 trillion for the first time:

The top-10 holdings in the ITA ETF are shown below and equate to what I consider to be a relatively concentrated 75% of the entire 35 company portfolio:

iShares

Raytheon Technologies (RTX) is the hoghest weight holding with a 21% share. Raytheon has always been a leading defense contractor, and with the addition of United Technologies is now a leading supplier to the commercial aerospace sector as well. RTX's Pratt & Whitney segment produces military jet engines and also supplier for the Airbus A220 and A320 aircraft. In addition, RTX's Collins Aerospace is one of the largest commercial aircraft component suppliers. RTX's significant exposure to missiles, missile defense systems, and IT systems for military supply chain management makes it in the forefront of today’s sad business. RTX is down 6.8% over the past year though offering an interesting entry point.

The #2 holding is not less known Lockheed Martin (LMT) with a 16.2% weight. According to Bloomberg Government's list of top-10 defense contractors, Lockheed has been by far the largest in FY2021 with $40+ billion in contractual defense related obligations: