Market Overview

Aerospace ETF Hits The Afterburners

Aerospace ETF Hits The Afterburners

Aerospace and defense stocks are once again on fire. The Dow Jones U.S. Select Aerospace & Defense Index (DJSASDT) surged 12.30 percent last month, posting its best monthly performance in nearly a decade.

That is good news for the Direxion Daily Aerospace & Defense Bull 3X Shares (NYSE: DFEN), the lone leveraged exchange traded fund, dedicated to aerospace and defense names.

What Happened

DFEN attempts to deliver triple the daily performance of the Dow Jones U.S. Select Aerospace & Defense Index.

“Aerospace companies include manufacturers, assemblers and distributors of aircraft and aircraft parts. Defense companies include producers of components and equipment for the defense industry, such as military aircraft, radar equipment and weapons,” according to Direxion.

Why It's Important

DFEN's underlying index allocates nearly 20 percent of its combined weight to Boeing Co. (NYSE: BA) and United Technologies Inc. (NYSE: UTX). Those are two of the six members of the Dow Jones Industrial Average that are up 10 percent or more this year. Boeing is the only Dow component that is up at least 20 percent year-to-date.

“Boeing's defense unit reported $6.1 billion in fourth-quarter revenue. The company said the 16 percent year-over-year increase was driven by a rise in volume across F/A-18 fighter jets, satellites and weapon programs,” reports CNBC.

Last month, United Technologies reported fourth-quarter earnings of $1.95 per share on revenue of $18.04 billion. Analysts expected earnings of $1.53 a share on sales of $16.88 billion.

Aerospace and defense stocks are extending their January bullishness into February. With a gain of more than 3 percent on Tuesday, DFEN is up about 14 percent month-to-date, making it one of the best-performing leveraged bullish ETFs in Direxion's stable this month.

What's Next

DFEN has seen slight inflows to start 2019 after traders put $15.43 million into the fund last year. The fund needs to rally another 26 percent to reclaim its 52-week high.

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