PPA ETF at $154: Can This Defense ETF Keep Beating ITA and SPY?

NYSEARCA:PPA Price And The Defense Supercycle Setup

PPA ETF Trading Range Liquidity And Current Market Position

NYSEARCA:PPA closed at $154.10 on December 12, down $0.53 on the day (-0.34%) from a previous close of $154.63. Intraday trading sat inside a tight $153.48–$155.31 band, showing steady two-way flow without panic. The current price trades only about 4% below the 52-week high at $160.22 and roughly 53% above the 52-week low at $100.71, which means the market is already pricing in a substantial defense upcycle, not an early contrarian entry. Reported fund size is around $6.5 billion in assets with roughly 43.3 million shares outstanding, while daily volume readings sit between about 23.6K and 156K shares depending on the data source. A median bid/ask spread near 0.06% and dollar volume in the tens of millions per day give PPA ETF sufficient liquidity for institutional tickets, but it is still a mid-sized sector fund, not a mega-ETF that can absorb unlimited intraday flow without slippage.

Index Design Of PPA ETF And TrueCap Exposure To Real Defense Revenue

PPA ETF tracks the SPADE Defense Index, which targets companies “systemically important” to U.S. defense, homeland security, and space operations. The product holds roughly 59–60 stocks, with about 93% of exposure in Industrials and around 7% in Technology, so the portfolio is tightly focused on the defense complex rather than broad cyclicals. The weighting scheme is a modified market-cap structure with a 10% cap per name at each quarterly rebalance in March, June, September, and December. The TrueCap overlay adjusts weights for conglomerates so the index reflects the share of the business actually tied to defense and space, not just headline market cap. Eligibility rules enforce minimum size and liquidity: market value above roughly $250 million, price above $5, at least 50,000 shares average daily volume, and revenue of at least $10 million per quarter, with removal triggers when price falls below $3, market value under $150 million, or traded value under $1 million. The result is a liquid, mid-to-large-cap basket that tracks real defense cash flows instead of including marginal or illiquid names just to expand the roster.

Concentration Profile Of NYSEARCA:PPA Versus ITA And Why It Matters

The crucial structural difference between PPA ETF and ITA is how much risk is placed in the leading holdings. ITA owns 39 companies and pushes about 44.68% of assets into just three stocks (GE Aerospace, RTX Corp., Boeing), with the top 10 positions at 70.39%, effectively turning it into a concentrated bet on a handful of primes. NYSEARCA:PPA spreads its exposure: it holds around 60 names, with the top three at roughly 23.54% and the top 10 at 56.18%. The largest positions are still familiar names such as RTX, General Electric, Boeing, General Dynamics, Honeywell and other majors, but their influence is constrained, leaving more room for mid-tier suppliers like L3Harris and Northrop Grumman and other Tier-2/Tier-3 contractors. This broader top-end structure reduces single-name shock risk; if one flagship contractor suffers a Boeing-style operational or regulatory problem, PPA ETF is less exposed than a product that parks nearly half the portfolio in three tickers.

Long-Run Performance Of PPA ETF Relative To The S&P 500

From late 2005 to late 2025, NYSEARCA:PPA has compounded at about 13.32% per year, beating a standard S&P 500 tracker by roughly 2.23 percentage points annually. During the global financial crisis, the worst 36-month rolling period for PPA ETF saw a drawdown of about -30.19%, still nearly 9 percentage points smaller than the S&P over the same stretch. At the other extreme, the strongest three-year window—roughly October 2022 to September 2025—produced around 146% total return for PPA ETF, versus about 100% for the S&P 500. That mix of smaller maximum losses and stronger best-case runs is exactly what you want from a sector allocation: participation plus some downside protection, not a high-beta trap that only works when everything rallies. Monthly history still shows heavy stress episodes, with drops of -13.4% (June 2008), -17.3% (October 2008), -16.4% (February 2009), and -20.9% (March 2020), but the long-run equity curve demonstrates that rebounds have more than compensated for those events.

Head-To-Head: NYSEARCA:PPA Versus ITA And XAR Over 14 Years

From October 2011 to November 2025, PPA ETF delivered about 18.20% annualized, versus around 16.66% for ITA and approximately 18.33% for XAR. On raw return, XAR edges out NYSEARCA:PPA by a narrow margin, but at the cost of visibly higher volatility: XAR’s standard deviation is roughly 19.92%, while PPA ETF sits near 17.13%. Downside risk metrics underline the difference. The Sortino ratio for NYSEARCA:PPA is around 1.68, better than XAR’s roughly 1.44, meaning each unit of downside volatility has historically been compensated more efficiently in PPA ETF. Rolling-return analysis shows that the worst five-year annualized return for PPA ETF is about 5.57%, substantially higher than the minimum five-year outcomes for its peers. XAR has recently outperformed over shorter windows—its best one-year rolling return is about 66.41%, compared with around 51.65% for PPA ETF—but that upside comes with a more aggressive risk profile that not every allocator wants at the satellite level.

Valuation, Earnings Growth And Profitability Inside PPA ETF

Current valuation for NYSEARCA:PPA sits in the high-growth bucket, not value territory. One view of the portfolio shows a P/E of 26.98 and a P/B of 4.79, versus 30.76 and 5.33 for ITA. Another snapshot gives PPA ETF a forward earnings multiple near 27.77x, which is consistent with an industrial growth portfolio supported by strong fundamentals. Income is modest. Dividend distribution yield is around 0.64%, with a 30-day SEC yield close to 0.37%, slightly below ITA’s 0.79%; the ETF’s role is capital appreciation, not income. The underlying earnings engine justifies these numbers. Across the portfolio, companies have grown EPS roughly 15–16% annually over the last three years, with forward consensus near 16.32% for the coming year, about double the growth expected from a broad industrial fund such as XLI. Recent earnings reports show weighted-average upside surprise near 9.96%, compared with about 7.73% for typical industrial benchmarks and around 8.45% for a broad large-cap reference, meaning constituents have consistently beaten expectations rather than merely meeting them. Quality metrics support that momentum. PPA ETF’s holdings exhibit weighted EBIT margins around 12.27%, net margins near 8.28%, and return on total capital about 7.30%, all materially above the 9.25% EBIT, 4.41% net margin, and 4.22% capital returns seen in more cyclical industrial baskets. A five-year beta near 0.85 confirms that, despite the sector label, PPA ETF behaves as lower-beta quality growth relative to the market.

Defense Spending, Macro Tailwinds And The 2026 Rearmament Cycle

Macro defense data provide the structural tailwind behind NYSEARCA:PPA. National defense consumption and gross investment in the U.S. reached roughly $1.14 trillion annualized in Q2 2025, up about 6.7% versus Q1 2024, marking the ninth straight year of increases. The sector has shown only small negative patches even during periods like 2012–2016, where annual declines averaged around 3.1%, underscoring that defense is treated as a strategic, not discretionary, line item. Globally, projections point to defense spending growing around 8.13% per year through 2035, with the U.S. still accounting for close to two-thirds of NATO expenditures. Drivers are straightforward: Russia–Ukraine, tensions in the Indo-Pacific, commitments to NATO rearmament, nuclear modernization, missile defense, and the expansion of Space Force and space-based surveillance. For 2026, current policy work includes proposals that would push roughly $18 billion of incremental U.S. procurement on top of prior plans. That money leaks into aircraft, ships, missiles and space assets, but also into electronics, communications, propulsion, cyber, and AI-enabled systems. The PPA ETF structure—TrueCap overlay and broader holding set—tilts exposure toward both prime integrators and the smaller and mid-cap specialists building subsystems, where earnings growth can overshoot the headline budget increases. If the rearmament cycle runs as projected, the portfolio’s mid-cap and specialized components should compound earnings faster than a mega-cap-only basket.

Risk Profile, Drawdowns, Valuation Compression And Liquidity In NYSEARCA:PPA

PPA ETF is still a concentrated sector product. With 56% in the top ten and exposure to a handful of key primes, single-name shocks remain a material risk. Historical five-year maximum drawdown around -16.99%, only slightly better than ITA’s -17.85%, shows that diversification reduces, but does not eliminate, damage when the sector corrects. Valuation risk is explicit: a 27–30x earnings multiple on defense contractors is high in absolute terms. If global defense spending fails to achieve the projected 8.13% CAGR, or if U.S. appropriations for FY26 and beyond fall short of the assumed $18 billion incremental procurement uplift, multiple compression could cut 10–20% from PPA ETF’s price even if earnings still grow. Inflation and cost overruns are another pressure point because many contracts are signed at fixed or semi-fixed prices; persistent cost inflation erodes margins before contracts can be repriced or renegotiated. Liquidity is acceptable but not bottomless. With daily turnover in the tens of millions of dollars and a spread around 0.06%, normal trading is efficient, but in stressed conditions—similar to the 2008–2009 and 2020 episodes—spreads can widen while underlying names gap lower. Correlation with the broader equity market remains positive, so PPA ETF does not hedge systemic equity risk even though it benefits from long-term defense budgets.

Comparison With Housing And Long-Term Wealth Building Context

The broader capital allocation backdrop matters for how NYSEARCA:PPA fits in a portfolio. From roughly 1995, U.S. home prices have climbed about 310%, while the S&P 500 price index has advanced around 1,200%, with total returns above 2,200% once dividends are included. Between 1992 and 2024, average annual S&P returns sit near 10.4%, while home prices have compounded at about 5.5% a year. Over the last five years, the average home sale price increased from about $371,100 to $512,800, an approximate 38% gain, while the S&P 500 is up around 86% in the same window. At the same time, homeowners face “hidden costs” of ownership—taxes, maintenance, insurance—estimated at nearly $16,000 per year, while equity investors mainly pay management fees typically below 1%. Against that landscape, an equity-sector fund like PPA ETF, with a long-run annualized return of 13.32% since 2005, not only outpaces property but also beats the main stock benchmark. Housing still delivers shelter, leverage, and tax benefits—such as interest and property-tax deductibility and capital-gains exclusions up to $250,000 for individuals and $500,000 for couples—but if the priority is capital compounding, allocations to products like NYSEARCA:PPA have historically driven faster wealth accumulation than residential real estate.

Portfolio Role, Investor Profile And Final Stance On NYSEARCA:PPA

At a $154.10 price point with a 52-week range of $100.71–$160.22, assets around $6.5 billion, a forward P/E near 27x, P/B around 4.8–4.9, a modest 0.64% distribution yield, and roughly 16% underlying EPS growth, PPA ETF is a growth-tilted defense-sector instrument, not an income product. Its track record—13.32% annualized since 2005, roughly 2.2% per year ahead of the S&P 500, long-term outperformance versus ITA, and risk-adjusted superiority to XAR—puts it in the category of sector funds that can credibly sit as a core satellite for long-horizon investors. The cost of that profile is a relatively high 0.58% expense ratio, valuation sensitivity at 27–30x earnings, and heavy dependence on continued defense budget expansion and program execution. Given the current price, macro defense trajectory, and structural positioning along the U.S. aerospace and defense value chain, the data supports a Buy and bullish stance on NYSEARCA:PPA for investors with at least a medium-term horizon who can tolerate equity drawdowns and are specifically targeting long-term exposure to the U.S. defense supercycle.

That's TradingNEWS