Select STOXX Europe Aerospace & Defense ETF

EUAD

Market cap $1.21B

The Select STOXX Europe Aerospace & Defense ETF (EUAD) is increasingly attractive amid heightened geopolitical tensions and European rearmament priorities. EUAD's fundamentals and valuation are reasonable, with a 25.94 PE ratio and 2.31 price/sales, supporting a buy rating despite recent price surges. Europe's urgent need to reduce reliance on U.S. security guarantees and counter both Russian and American unpredictability underpins the investment thesis.

Trump's $1.5T military budget and rising global tensions could lift defense ETFs and spill over into cybersecurity, AI, manufacturing and space ETFs.

A German contractor, Italian aerospace name, and British defense company.

The US Department of War rules the skies. This aerial military supremacy has enforced the Trump Doctrine that has ended 8 international wars and kept US military casualties at zero.

Market uncertainty is more than just Fed or domestic policy related; often, geopolitics can have an even bigger impact on the fate of the markets than either of those factors. While not as severe as the impact left on the world by the pandemic, the threat of war also looms.

One of the most persistent themes this year has been global defense. Historically, it has been an industry that tends to shine when geopolitics drives the macro narrative.

Europe's macro outlook is shifting. After years of fiscal restraint and fragmented policy, the region is entering a new chapter - one centered on pro-growth fiscal policy, energy security, and capital-market reform.

Defense industry giants like Lockheed (LMT) and Raytheon (RTX) retain top spots, but innovative firms and European players are gaining ground. Boeing (BA) has fallen in defense revenue rankings, while newcomers like GE Aerospace (GE), SpaceX, and Palantir show strong growth potential. To capture defense innovation, I recommend ETFs such as SHLD, EUAD, and WDEF, with SHLD as a top pick for technology-driven exposure.

The Select STOXX Europe Aerospace & Defense ETF is a concentrated European defense bet that benefited from the NATO rearmament trade. After a near 80% run from my initial interest in the SHLD ETF, a similar fund, I believe the narrative is priced in. Procurement friction, manpower issues, and an imperfect index converge to make EUAD a "Hold" for me, as I am unsure about Europe's future given recent headlines.

Ideally, thematic ETFs capture long-term secular investment themes not fully represented by broad market or sector-based approaches. The best thematic index implementations make use of quantifiable measures such as revenue and market share to identify companies with meaningful exposure to specific themes.