We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is SPDR S&P Aerospace & Defense ETF (XAR) a Strong ETF Right Now?
Read MoreHide Full Article
A smart beta exchange traded fund, the SPDR S&P Aerospace & Defense ETF (XAR - Free Report) debuted on 09/28/2011, and offers broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Managed by State Street Global Advisors, XAR has amassed assets over $1.17 billion, making it one of the larger ETFs in the Industrials ETFs. Before fees and expenses, XAR seeks to match the performance of the S&P Aerospace & Defense Select Industry Index.
The S&P Aerospace & Defense Select Industry Index represents the aerospace & defense sub-industry portion of the S&P Total Stock Market Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Global Select Market. The Aerospace & Defense Index is a modified equal weight index.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.
XAR's 12-month trailing dividend yield is 0.58%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
XAR's heaviest allocation is in the Industrials sector, which is about 100% of the portfolio.
When you look at individual holdings, Rocket Lab Usa Inc. (RKLB - Free Report) accounts for about 4.24% of the fund's total assets, followed by Axon Enterprise Inc (AXON - Free Report) and Boeing Company (BA - Free Report) .
XAR's top 10 holdings account for about 38.41% of its total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Aerospace & Defense ETF has lost about -16.84% so far, and is down about -19.40% over the last 12 months (as of 10/07/2022). XAR has traded between $91.68 and $126.95 in this past 52-week period.
The ETF has a beta of 1.08 and standard deviation of 32.89% for the trailing three-year period, making it a medium risk choice in the space. With about 36 holdings, it has more concentrated exposure than peers.
Alternatives
SPDR S&P Aerospace & Defense ETF is a reasonable option for investors seeking to outperform the Industrials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Invesco Aerospace & Defense ETF (PPA - Free Report) tracks SPADE Defense Index and the iShares U.S. Aerospace & Defense ETF (ITA - Free Report) tracks Dow Jones U.S. Select Aerospace & Defense Index. Invesco Aerospace & Defense ETF has $1.35 billion in assets, iShares U.S. Aerospace & Defense ETF has $3.56 billion. PPA has an expense ratio of 0.61% and ITA charges 0.39%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Industrials ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Is SPDR S&P Aerospace & Defense ETF (XAR) a Strong ETF Right Now?
A smart beta exchange traded fund, the SPDR S&P Aerospace & Defense ETF (XAR - Free Report) debuted on 09/28/2011, and offers broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Managed by State Street Global Advisors, XAR has amassed assets over $1.17 billion, making it one of the larger ETFs in the Industrials ETFs. Before fees and expenses, XAR seeks to match the performance of the S&P Aerospace & Defense Select Industry Index.
The S&P Aerospace & Defense Select Industry Index represents the aerospace & defense sub-industry portion of the S&P Total Stock Market Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Global Select Market. The Aerospace & Defense Index is a modified equal weight index.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.
XAR's 12-month trailing dividend yield is 0.58%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
XAR's heaviest allocation is in the Industrials sector, which is about 100% of the portfolio.
When you look at individual holdings, Rocket Lab Usa Inc. (RKLB - Free Report) accounts for about 4.24% of the fund's total assets, followed by Axon Enterprise Inc (AXON - Free Report) and Boeing Company (BA - Free Report) .
XAR's top 10 holdings account for about 38.41% of its total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Aerospace & Defense ETF has lost about -16.84% so far, and is down about -19.40% over the last 12 months (as of 10/07/2022). XAR has traded between $91.68 and $126.95 in this past 52-week period.
The ETF has a beta of 1.08 and standard deviation of 32.89% for the trailing three-year period, making it a medium risk choice in the space. With about 36 holdings, it has more concentrated exposure than peers.
Alternatives
SPDR S&P Aerospace & Defense ETF is a reasonable option for investors seeking to outperform the Industrials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Invesco Aerospace & Defense ETF (PPA - Free Report) tracks SPADE Defense Index and the iShares U.S. Aerospace & Defense ETF (ITA - Free Report) tracks Dow Jones U.S. Select Aerospace & Defense Index. Invesco Aerospace & Defense ETF has $1.35 billion in assets, iShares U.S. Aerospace & Defense ETF has $3.56 billion. PPA has an expense ratio of 0.61% and ITA charges 0.39%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Industrials ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.