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Is SPDR S&P Aerospace & Defense ETF (XAR) a Strong ETF Right Now?
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Making its debut on 09/28/2011, smart beta exchange traded fund SPDR S&P Aerospace & Defense ETF (XAR - Free Report) provides investors broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other 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
The fund is sponsored by State Street Global Advisors. It has amassed assets over $1.80 billion, making it one of the larger ETFs in the Industrials ETFs. This particular fund, before fees and expenses, 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
It's 12-month trailing dividend yield comes in at 0.36%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. 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.
Taking into account individual holdings, Spirit Aerosystems Holdings Inc. Class A (SPR - Free Report) accounts for about 4.69% of the fund's total assets, followed by Heico Corporation (HEI - Free Report) and Raytheon Technologies Corporation (RTX - Free Report) .
The top 10 holdings account for about 43.77% of total assets under management.
Performance and Risk
So far this year, XAR return is roughly 8.05%, and was up about 1.61% in the last one year (as of 03/31/2022). During this past 52-week period, the fund has traded between $107.27 and $136.44.
The ETF has a beta of 1.10 and standard deviation of 31.29% for the trailing three-year period, making it a medium risk choice in the space. With about 34 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 $1.38 billion in assets, iShares U.S. Aerospace & Defense ETF has $3.70 billion. PPA has an expense ratio of 0.61% and ITA charges 0.42%.
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.
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Is SPDR S&P Aerospace & Defense ETF (XAR) a Strong ETF Right Now?
Making its debut on 09/28/2011, smart beta exchange traded fund SPDR S&P Aerospace & Defense ETF (XAR - Free Report) provides investors broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other 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
The fund is sponsored by State Street Global Advisors. It has amassed assets over $1.80 billion, making it one of the larger ETFs in the Industrials ETFs. This particular fund, before fees and expenses, 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
It's 12-month trailing dividend yield comes in at 0.36%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. 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.
Taking into account individual holdings, Spirit Aerosystems Holdings Inc. Class A (SPR - Free Report) accounts for about 4.69% of the fund's total assets, followed by Heico Corporation (HEI - Free Report) and Raytheon Technologies Corporation (RTX - Free Report) .
The top 10 holdings account for about 43.77% of total assets under management.
Performance and Risk
So far this year, XAR return is roughly 8.05%, and was up about 1.61% in the last one year (as of 03/31/2022). During this past 52-week period, the fund has traded between $107.27 and $136.44.
The ETF has a beta of 1.10 and standard deviation of 31.29% for the trailing three-year period, making it a medium risk choice in the space. With about 34 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 $1.38 billion in assets, iShares U.S. Aerospace & Defense ETF has $3.70 billion. PPA has an expense ratio of 0.61% and ITA charges 0.42%.
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.