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This Defense ETF Combines Defense, Cybersecurity, and AI


You might not expect to find stocks like Broadcom (NASDAQ:AVGO) or Crowdstrike (NASDAQ:CRWD) in a defense ETF, but the SPDR S&P Kensho Future Security ETF (NYSEARCA:FITE) is a unique defense ETF that takes a differentiated, forward-looking approach to national security and the defense industry.

The concept of warfare is rapidly evolving and now increasingly encompasses cyber warfare, drones, space, and other new arenas. That’s why the FITE ETF goes beyond tanks, fighter planes, and missiles and expands the definition of defense to include companies involved in software, cybersecurity, drones, robotics, and more.

I’m bullish on FITE because this differentiated ETF enables investors to capitalize on this nascent theme.

What is the FITE ETF’s Strategy?

FITE invests in an index called the S&P Kensho Future Security Index. According to fund sponsor State Street (NYSE:STT), the index is comprised of “companies whose products and services are driving innovation behind future security, which includes the areas of cybersecurity, advanced border security, and the following areas for military application: robotics, drones and drone technologies, space technology, wearable technologies and virtual or augmented reality activities.”

Thus, the ETF allows investors to “invest in a portfolio of companies involved in the future of warfare and a nation’s security.”

A Portfolio Built for the Future of War

FITE holds 60 stocks, and its top 10 holdings account for just 20.8% of the fund, so FITE is fairly diversified and does a good job of limiting concentration risk.

Below is an overview of FITE’s top 10 holdings using TipRanks’ holdings tool.

While war is still fought on the battlefield, it is increasingly moving into new fronts, and FITE’s portfolio capitalizes on this shift.

One key arena is cyberspace. The Heritage Foundation states, “No threat facing America has grown as fast, or in a manner as difficult to understand, as the danger from cyberattacks.” It reports that the most dangerous cyberattacks come not from lone hackers in a basement but sophisticated nation-state hackers who view cyber warfare as a new avenue to attack the United States. Terrorist organizations and…

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