PPA vs. ITA vs. XAR – Which Defense ETF Is Best?

As geopolitical tensions and defense budgets continue to impact markets, exchange-traded funds focused on the aerospace and defense sector have drawn investor attention. Three of the largest and most widely followed ETFs in this space are the Invesco Aerospace & Defense ETF (PPA), the iShares U.S. Aerospace & Defense ETF (ITA), and the SPDR S&P Aerospace & Defense ETF (XAR). While all three provide access to defense contractors and related aerospace businesses, they differ in structure, diversification, and strategy.Valentine's Day Sale - 70% OffUnlock hedge fund-level data and powerful investing tools for smarter, sharper decisions Stay ahead of the market with the latest news and analysis and maximize your portfolio's potential Invesco Aerospace & Defense ETF The Invesco Aerospace & Defense ETF tracks the SPADEX Defense Index and focuses on companies whose primary business is defense or aerospace work. As a result, it tends to have heavier exposure to major defense contractors such as Lockheed Martin (LMT), Raytheon (RTX), and Northrop Grumman (NOC). Because of this focused approach, PPA is often closely impacted by changes in defense spending and geopolitical developments. However, this concentration can also lead to more volatility when government budgets shift. iShares U.S. Aerospace & Defense ETF The iShares U.S. Aerospace & Defense ETF tracks the Dow Jones U.S. Select Aerospace & Defense Index and provides exposure to a broader mix of companies. In addition to prime defense contractors, it includes suppliers, parts manufacturers, and aerospace service providers. Because of this wider industrial footprint, ITA can benefit not only from defense spending but also from broader aerospace demand. This structure may help smooth performance when defense budgets are not the only growth driver. SPDR S&P Aerospace & Defense ETF The SPDR S&P Aerospace & Defense ETF uses an equal-weight methodology rather than market-cap weighting. This means that smaller and mid-sized companies receive similar initial weightings as the largest defense contractors. As a result, XAR provides more balanced exposure across the industry and is less dominated by a handful of major names. This approach can potentially capture growth from emerging suppliers and mid-tier firms. Wall Street's Take on Defense ETFs Turning to Wall Street, out of the three defense ETFs mentioned above, analysts think that XAR has the most room to run. In fact, XAR's price target of $326.66 per share implies 20.7% upside potential.