How Much RTX Are You Quietly Betting On

Your diversified fund may have quietly made a concentrated bet on this one high-flying aerospace stock for you.

Aerospace and defense firm RTX has had a powerful run, with its stock now trading about 16% above its 200-day moving average. If you own broad industrial or defense-focused ETFs, you likely own a bigger piece of this single company than you realize, an exposure you never actively chose.

How Far Has The Stock Really Run?

The stock's recent performance has been strong, returning +40% over the past year and +23% over the past three months alone. That climb has left it trading at about 30 times its expected earnings for the year ahead, well above the roughly 10% profit growth forecast for the same period. For a deeper dive into how the company itself is navigating its current environment, it can be helpful to review the details from its latest earnings call.

Which Of Your Funds Are Most Exposed?

This run-up is now concentrated in certain funds. RTX is held across 48 of the equity funds in our universe. The most exposed is the iShares U.S. Aerospace & Defense ETF (ITA), which holds about 16.6% of its assets in this one stock. While the fund has returned a solid +20% over the past year, that performance shows that other holdings have lagged RTX's own climb. Other funds carry meaningful, if smaller, positions. The State Street Industrial Select Sector SPDR ETF (XLI) holds RTX at about 5.0% of the fund, and the iShares U.S. Industrials ETF (IYJ) holds it at about 3.4%.

What A Pullback Would Actually Cost

This concentration creates a specific, measurable risk. This is not a prediction, but a scenario: if RTX simply fell back to its 200-day average, the stock would drop about 14%. For the heavily exposed iShares U.S. Aerospace & Defense ETF, that single move would shave about 2.3% off the entire fund's value. For the State Street Industrial Select Sector SPDR ETF, the loss would be about 0.7%. The problem is that this exposure is sticky. You cannot surgically sell just the RTX shares inside your ETF. To reduce the position, you have to sell the fund itself, which can trigger a taxable capital gain, making it difficult to trim.

Keeping The Theme With Lower Concentration

There are ways to maintain exposure to the sector without concentrating so much in one name. For instance, the Invesco S&P 500 Equal Weight Industrials ETF (RSPN) holds RTX at about 1.4% of the fund. That is a fraction of the 16.6% held by the iShares U.S. Aerospace & Defense ETF. Over the past year, RSPN returned +12%. That is less than the +20% for ITA, but it comes with significantly less single-stock risk from this one name.

How Do You Find A Better-Balanced Fund?

Whether this is a name you are happy to keep riding, or one you would rather not own quite so much of, the first move is the same: see your true exposure to it, then find funds that carry the same theme with less of any single stock. A fund's name tells you almost nothing about how concentrated it has quietly become.

Our ETF Valuation and Performance Scorecard ranks the major ETFs side by side on valuation, return, and risk, so you can see which funds lean hardest on a handful of names and which spread the exposure while keeping the performance.

What's A Way To Avoid This Trap By Design?

The whole problem here is a winner quietly growing into an outsized, hard-to-trim position you never sized on purpose. If you'd rather avoid that by design, there's another way to think about it. An index fund holds whatever its benchmark dictates and never trims a winner for you, so concentration builds silently until a pullback does the trimming.

Our High Quality (HQ) Portfolio takes the opposite approach: rule-based, multi-factor selection across different kinds of businesses, re-balanced on a schedule, so winners get trimmed and no single name quietly becomes the whole position. It has a record of outpacing a benchmark that combines the three major indices - the S&P 500, S&P Mid-cap, and Russell 2000.