Sri Lanka's central bank is expected to hold rates steady on Tuesday to keep pressure on inflation as taxes required to meet the goals of a $2.9 billion IMF loan are likely to prompt a fresh spike in the cost of living.
An Iranian strike on Pakistan this week that drew a rapid military riposte and raised fears of greater regional turmoil was driven by Iran's efforts to reinforce its internal security rather than its ambitions for the Middle East, according to three Iranian officials, one Iranian insider and an analyst.
Norfolk Southern (NSC) shares soared 3.6% in the last trading session to close at $234.26. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 1.6% loss ov
Hertz Global Holdings, Inc. (HTZ) shares rallied 7.5% in the last trading session to close at $8.99. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compa
In the face of intense pressure from authorities to help revive a sickly stock market, Chinese fund management companies are increasingly launching equity funds that are bankrolled mostly by the firm's own money.
As geopolitical tensions heat up around the world, it’s a good time for investors to compare three of the top defense ETFs -- the iShares U.S. Aerospace & Defense ETF (
BATS:ITA
), the SPDR S&P Aerospace & Defense ETF (
NYSEARCA:XAR
), and the Invesco Aerospace & Defense ETF (
NYSEARCA:PPA
).
I’m bullish on the defense sector as a whole for several reasons. Unfortunately, geopolitical tensions are escalating in several hotspots worldwide, as illustrated by the ongoing clashes in the Red Sea.
Furthermore, the aerospace and defense sector is attractive because these are excellent businesses that enjoy significant strategic moats. They have longstanding relationships with their customers (governments), and this industry features significant regulatory barriers to entry. Furthermore, building these types of products requires substantial technological expertise and investment in R&D. Because of these factors, it is difficult for newcomers to disrupt these companies.
With this in mind, which is the best defense ETF? Read on to find out.
iShares U.S. Aerospace & Defense ETF (BATS:ITA)
According to BlackRock (
NYSE:BLK
), the “iShares U.S. Aerospace & Defense ETF seeks to track the investment results of an index composed of U.S. equities in the aerospace and defense sector.”
The fund invests in U.S. companies that manufacture commercial and military aircraft and other defense equipment.
ITA has been around since 2006, and it is the largest aerospace and defense ETF with $5.9 billion in assets under management.
ITA has provided investors with solid returns over the years. As of December 31, 2023, the fund has generated an annualized three-year return of 11.2%, an annualized five-year return of 9.2%, and an annualized 10-year return of 10.3%.
The fund owns 36 stocks, and its top 10 holdings account for 76.15% of assets. Below is an overview of
ITA’s top 10 holdings using TipRanks’ holdings tool.
As you can see, it's very concentrated in its top holdings, like Raytheon (
NYSE:RTX
) and Boeing (
NYSE:BA
), which have massive weightings of 17.6% and 16.6%, respectively.
Overall, this has been a good ETF over the years, but this outsized position in Boeing may be cause for concern at this point, as the aircraft manufacturer has become embroiled in a number of mishaps early in 2024. These include the highly-publicized incident in which the door plug came off of a Boeing 737 midflight, causing an emergency landing, and a
collision involving two Boeing airplanes at Chicago’s O’Hare airport.
Boeing clearly faces significant questions going forward, and the issues led several sell-side analysts to
downgrade the stock. ITA gives investors a lot of exposure to the troubled stock, which is cause for concern.
Is ITA Stock a Buy, According to Analysts?
Turning to Wall Street, ITA earns a Moderate Buy consensus rating based on 27 Buys, nine Holds, and one Sell rating assigned in the past three months. The
average ITA stock price target of $134.24 implies 10.75% upside potential.
Lastly, ITA features an expense ratio of 0.40%, meaning that an investor in the fund will pay $40 on a $10,000 investment annually. ITA has been a strong performer over the years, but its large position in Boeing could be a headwind in the short-to-intermediate term.
SPDR S&P Aerospace & Defense ETF (NYSEARCA:XAR)
This brings us to the SPDR S&P Aerospace & Defense ETF. State Street’s XAR launched in 2011 and has $1.9 billion in assets under management.
According to fund sponsor State Street, XAR “seeks to provide investment results that, before fees and expenses, generally correspond to the total return performance of the S&P Aerospace & Defense Select Industry Index.” This is a “modified equal-weighted index which provides the potential for unconcentrated industry exposure across large-, mid-, and small-cap stocks.”
This modified equal-weighted approach is appealing because it means that, unlike ITA, XAR doesn’t have massive exposure to Boeing. While Boeing makes up 16.6% of ITA, XAR has a more manageable 3.5% weighting towards Boeing. In fact, it isn't even one of XAR's top 10 positions.
In total, XAR owns 35 stocks, and its top 10 holdings make up 41.6% of the fund, so it is far less concentrated than ITA. Below is an overview of
XAR’s top 10 holdings using TipRanks' holdings tool.
As you can see, XAR is more diversified than ITA, as its top holdings like Axon Enterprise (
NASDAQ:AXON
), L3Harris Technologies (
NYSE:LHX
), and Raytheon (
NYSE:RTX
) each have weightings of just 4.2%.
As of December 31, 2023, XAR generated a fairly underwhelming three-year annualized return of 6.3% but much more impressive five- and 10-year annualized returns of 12.2% and 11.7%, respectively. This three-year return was worse than ITA's, but its five- and 10-year returns were slightly better.
Like ITA, XAR earns a Moderate Buy consensus rating based on 25 Buys, 10 Holds, and one Sell rating assigned in the past three months. The
average XAR stock price target of $148.13 implies 14.75% upside potential.
Finally, XAR’s expense ratio of 0.35% is the cheapest of the group. I'm constructive on XAR, given its strong long-term five- and 10-year performance, its lower exposure to Boeing, and the fact that it has the most cost-effective expense ratio of these three major defense ETFs.
Invesco Aerospace & Defense ETF (NYSEARCA:PPA)
Invesco’s PPA launched in 2005 and has $2.6 billion in AUM. According to Invesco (
NYSE:IVZ
), PPA invests at least 90% of its assets in the SPADE Defense Index, an index that is comprised of the stocks of companies that are “involved in the development, manufacturing, operations and support of US defense, homeland security and aerospace operations.”
PPA has outperformed both ITA and XAR in recent years. As of December 31, the fund has an annualized three-year return of 12.1%, an annualized five-year return of 14.8%, and an annualized 10-year return of 13.3%.
PPA holds 52 stocks, and its top 10 holdings account for 52.2% of assets. Below is an overview of
PPA’s top 10 holdings using TipRanks’ holdings tool.
As you can see, like XAR, PPA has a more manageable position in Boeing (accounting for 5.05% of the fund). On the downside, PPA is the most expensive of these three funds, with an expense ratio of 0.58%.
PPA earns a Moderate Buy consensus rating based on 40 Buys, 12 Holds, and one Sell rating assigned in the past three months. The
average PPA stock price target of $99.14 implies 9.7% upside potential.
The Takeaway: XAR Looks Like the Best ETF
In conclusion, I’m optimistic about all three of these ETFs as the aerospace and defense sector looks well-positioned for the short term based on escalating tensions worldwide and for the long term based on the strong moats these businesses enjoy.
All three are good ETFs, and they all invest in similar businesses. One key difference is that ITA is much more exposed to Boeing than the other two ETFs discussed here. Given the considerable issues that Boeing is dealing with right now, this could be a detriment to ITA, going forward. Based on that, I am ranking XAR and PPA ahead of ITA at this point in time.
PPA and XAR have a lot in common, and both feature lower exposure to Boeing. PPA has generated slightly better returns, but I view XAR as the best choice at the moment because its expense ratio is significantly lower than PPA’s, making it the winner here.
Disclosure
In this piece, I
evaluated two cloud and networking stocks, Arista Networks (
NYSE:ANET
) and Juniper Networks (
NYSE:JNPR
), using TipRanks' comparison tool to see which stock is better. A closer look suggests neutral views for both. However, one has a much brighter outlook, calling for a wait-and-see approach.
Arista Networks is a computer networking company that designs and sells multilayer network switches to provide software-defined networking for data centers, cloud computing, high-performance computing, and high-frequency trading computers. Similarly, Juniper Networks develops and markets networking products like routers, switches, network-management software and security products, and software-defined networking technology.
Shares of Arista Networks are up 123% over the last year following a three-month rally of 30%. Meanwhile, Juniper Networks stock has skyrocketed over the last three months,
climbing an impressive 47%, although it's up only 20% over the last 12 months.
JNPR is also up 26.6% for the year already. However, that massive gain is entirely due to the recent acquisition announcement, which has set a firm $40/share price on the stock (more on that below). On the other hand, Arista Networks has enjoyed a fairly steady upward march over the last year or so. Thus, a closer look is needed to see whether fair value has been reached.
Arista Networks (NYSE:ANET)
At a P/E of 41.2, Arista Networks is trading slightly higher than its mean P/E of 36.7 since February 2019. Due to a mix of positive and negative factors, a neutral view seems appropriate, pending a better entry price into the stock.
First, Arista Networks has received quite a few analyst upgrades recently in connection with its AI-related technology. Melius Research upgraded the stock for the AI "
halo effect," while JPMorgan (
NYSE:JPM
) upgraded it and
added it to its Focus List, also due to its AI offerings. Piper Sandler named Arista Networks
one of the best-positioned AI names, and Argus Research named Arista
one of its top picks for 2024.
While some analysts do get carried away during high-momentum periods for tech stocks, receiving multiple upgrades is definitely worth noticing. On the other hand, the higher Arista Networks rises, the further it ventures into overbought territory. With a Relative Strength Index of 73.6, the stock has already surpassed the overbought threshold of 70, meaning it could be overdue for a correction.
Additionally, a review of insider trading activity for Arista Networks
reveals a significant number of Auto Sell transactions. When a stock price has been moving steadily higher over an extended period of time, it makes sense for insiders to start taking profits.
In fact, company insiders typically establish pre-set trading plans with prices at which to automatically sell their company's stock. Thus, a large number of auto-sell transactions suggests insiders are taking profits because they don't see much more upside left in the near term.
There's one last bullish note to point out for Arista Networks. It would be an excellent buy-and-hold position, but only for the ultra-long term. The shares are up 213% over the last three years, 347% over the last five, and 1,711% since June 2014.
Thus, investors who can stomach buying a stock in overbought territory near its 52-week high while insiders have been selling shares may still consider buying a few shares — as long as they plan to hold the stock for many years. However, I personally would just wait for the next correction and buy shares then.
What is the Price Target for ANET Stock?
Arista Networks has a Strong Buy consensus rating based on 13 Buys, three Holds, and zero Sell ratings assigned over the last three months. Nonetheless, at $253.27, the
average Arista Networks stock price target implies upside potential of 1.64%.
Juniper Networks (NYSE:JNPR)
The recent acquisition offer for Juniper Networks has set a hard value of $40/share for the company's stock, so at current levels just below that price, little upside is left. Thus, a neutral view seems appropriate — with the possibility of a more constructive merger-arbitrage view if the price drops meaningfully.
Hewlett Packard Enterprise (
NYSE:HPE
) has offered to buy Juniper Networks
for $40/share or $14 billion in cash, with the deal expected to close late this year or in early 2025. As a result, while that transaction is pending, it may not be wise to buy Juniper shares unless they drop significantly below that price for some reason.
The deal is aimed at enhancing HPE's artificial intelligence prowess through Juniper's AI-related networking gear. However, the window before the transaction is expected to close is quite long, so it may be worth monitoring Juniper for the possibility of an attractive merger-related play in the meantime.
What is the Price Target for JNPR Stock?
Juniper Networks has a Hold consensus rating based on one Buy, 12 Holds, and one Sell rating assigned over the last three months. At $35.45, the
average Juniper Networks stock price target implies downside potential of 5%.
Conclusion: Neutral on ANET and JNPR
Although Arista Networks and Juniper Networks both receive neutral ratings, the reasons are entirely different. In fact, Arista is the clear winner of this pairing because the likelihood of a more attractive entry point materializing seems far greater.
Disclosure
Bank Negara Malaysia (BNM) will leave its overnight policy rate (OPR) unchanged at 3.00% on Jan. 24 and hold it there until at least end-2025 as price pressures are expected to increase and growth remains steady, a Reuters poll of economists showed.
How is SPY stock faring? The
SPDR S&P 500 ETF Trust is up 0.21% in the past 5 days and has risen 23.4% over the past year.
According to TipRanks’ unique ETF analyst consensus, determined based on a weighted average of its holdings’ analyst ratings, SPY is a Moderate Buy. The Street’s average price target of $523.76 implies an upside of 9.9%.
Currently, SPY’s five holdings with the highest upside potential are Marathon Oil (
MRO
), Bunge Limited (
BG
), Warner Bros (
WBD
), United Airlines (
UAL
), and First Solar (
FSLR
). Its five holdings with the greatest downside potential are Expeditors International (
EXPD
), Robert Half International (
RHI
), Viatris (
VTRS
), Resmed (
RMD
), and Tyson Foods (
TSN
).
Revealingly, SPY’s ETF Smart Score is eight, implying that this ETF is likely to outperform the market.
Power up your ETF investing with TipRanks. Discover the
Top Equity ETFs with High Upside Potential, carefully curated based on TipRanks’ analysis.
Disclosure
Which stocks are best to buy now? According to Top Wall Street Analysts, the three stocks listed below are Strong Buys. Each stock received a new Buy rating recently and has a significant upside as well.
To find more stocks like these, take a look at TipRanks’
Analyst Top Stocks tool. It shows you a real-time list of all stocks that have been recently rated by Top-ranking Analysts.
Here are today’s top stock picks, according to analysts. Click on any ticker to thoroughly research the stock before you decide whether to add it to your portfolio.
Caesars Entertainment (
NASDAQ:CZR)
– Caesars Entertainment
is an American hotel and casino entertainment company. Yesterday,
Stifel Nicolaus Analyst Steven Wieczynski maintained a Buy rating but decreased the price target to $67 from $70 per share. Interestingly, 10 out of the 11 Top Analysts who recently rated the stock gave it a Buy. Taken together, their 12-month price targets imply an upside of about 34%.
Madrigal Pharmaceuticals (
NASDAQ:MDGL)
– This is a clinical-stage biopharmaceutical company. Yesterday,
J.P. Jefferies Analyst Akash Tewari maintained a Buy rating on the stock but decreased the price target to $340 from $321 per share. In the last three months, all eight Top Analysts covering the stock have rated it a Buy. Taken together, their 12-month price targets imply an upside of about 44%.
Humana (
NYSE:HUM
) – This company develops and operates high-end hotels and casinos. Yesterday,
Goldman Sachs Analyst Nathan Rich maintained a Buy rating on the stock but decreased the price target to $515 from $595 per share. Interestingly, ten out of the twelve Top Analysts who recently rated the stock gave it a Buy. Taken together, their 12-month price targets imply an upside of about 40%.
Who are the Top Analysts?
TipRanks ranks financial analysts according to the success rates of their ratings and the average return on each of their ratings. The Top Analysts have each earned a five-star ranking, thanks to the accuracy and profitability of their ratings over time.
See real-time analyst rankings and learn more about the performance of Top Analysts on TipRanks’
Top Wall Street Analysts page.
Disclosure
An Iranian strike on Pakistan this week that drew a rapid military riposte and raised fears of greater regional turmoil was driven by Iran's efforts to reinforce its internal security rather than its ambitions for the Middle East, according to three Iranian officials, one Iranian insider and an analyst.
SLB’s stock (NYSE: SLB), formerly known as Schlumberger, which provides oil field services including drilling, completion, and production solutions to upstream oil & gas companies in the U.S. and abroad, is scheduled to report its fiscal fourth-quarter results on Frid
Intel stock (NASDAQ: INTC) is expected to publish its Q4 2023 results on January 25. We expect revenue for the quarter to come in at about $15.2 billion, in line with consensus estimates. This would mark an increase of about 8% versus the previous year. We expect the compan
Computing behemoth IBM (NYSE:IBM) is slated to report its Q4 2023 results January 24, reporting on a quarter that is likely to have seen IT spending remain lackluster. We estimate that IBM’s revenue will come in at about $17.3 billion for the quarter, roughly in line with t
February Nymex natural gas (NGG24 ) on Thursday closed -0.173 (-6.03%). Nat-gas prices on Thursday tumbled to a 2-week low and closed sharply lower after weekly EIA nat-gas supplies fell less than expected. The EIA reported that nat-gas inventories fell -154 bcf, a smaller draw than expectations of -165 bcf....
March ICE NY cocoa (CCH24 ) on Thursday closed +10 (+0.22%), and Mar ICE London cocoa #7 (CAH24 ) closed -17 (-0.46%). Cocoa prices on Thursday opened lower but recovered from their worst levels and settled mixed, with NY cocoa posting a 46-year nearest-futures high. Concerns that near-record cocoa prices...
Lean hog futures weakened 35 cents in the Feb contract, but gained 15 to 50 cents in the spring delivery months. April hogs are now a $7.35 premium to Feb, while June is a $13.62 premium to April. USDA’s National Average Afternoon Base Hog price $48.04 for Thursday, up by...
Thursday’s cotton trading finished with futures 7 to 81 points in the black. The old crop contracts rallied more than new crop widening the March-Dec difference to 265 points. The updated 7-day QPF from NOAA has heavy accumulations for the TX/LA Gulf, with as much as 7” expected over the...
Futures spent the majority of the trading range in the red on Thursday, but spent the majority of the day session in the black. A the close price were fractionally to 1 ¾ cents higher. March corn printed an 8 ¼ cent range for the day from -5 ½ to...
Checked
15 minutes 52 seconds ago
This feed is responsible for generating the rss feed related to the topic Stocks