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ETF NEWS: PLAYING DEFENSE

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02/07/2007

Its budget time again in Washington and President Bush's new proposals are likely to include a lot of fresh spending on defense and homeland security. As an investor, there is one great way to take advantage of this bigger slice of the federal budget pie going to defense expenditures. I am speaking here of the PowerShares Aerospace and Defense Portfolio (PPA).

This ETF boasts some of the biggest names in the defense and aerospace sector, including Boeing (BA), Lockheed Martin (LMT), General Dynamics (GD) and United Technologies (UT). PPA was designed to seek investment results that correspond generally to the price and yield (before the fees and expenses) of an equity index called the SPADE Defense index.

The ETF normally invests at least 80% of total assets in the common stocks of aerospace and defense companies. It may invest at least 90% of total assets in common stocks that comprise the SPADE Defense Index.

Unfortunately, I think rising global tensions are here to stay. Dealing with those tensions requires a lot of new military technology and that means a lot of government money going to the big defense contractors. If you are looking for a way to leverage this circumstance in your portfolio, you definitely should put PPA on your radar.

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