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Betting on a 23.3% Rise in Aerospace & Defense Stocks

|Includes: BA, GD, LMT, NOC, Invesco Aerospace & Defense Portfolio ETF (PPA), RTN

Earlier this week, a massive play on the growth of stocks in the aerospace and defense sector was made when 4.4 million shares (mostly buys) were made in the Powershares Aerospace & Defense ETF (NYSE: PPA).  On a typical day the fund trades 30,000 to 50,000 shares highlighting the liquidity that this fund has.  Over the past month, the ETF has seen several days which have traded more than a half mission shares.

The volume on June 22nd can likely be attributed to a Merrill Lynch note which stated that they thought the sector could hit the sector's 2007 highs.

PPA is currently at $19.65 and has traded in a range between $19 and $20.60 for the past few months. It peaked intraday on 10 October 2007 at $24.23 indicating an upside potential by Merrill Lynch of 23.3%.

As cited by Murray Coleman in Barrons, from a technical standpoint, Merrill Lynch doesn't see much resistance until the sector reaches their pre-crisis lows.

Valuation of defense companies remain near historical lows, even as the price remains steady.  And as future defense budget estimates gain clarity with the recognition that a significant budget decline is not forthcoming and news from the Paris Air Show continues to show growth on the commercial side, the potential in Merrill's forecast appears justified.