Launched on 12/16/1998, the Materials Select Sector SPDR ETF (
XLB Quick Quote XLB - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Materials - Broad segment of the equity market.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Materials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 10, placing it in bottom 38%.
The fund is sponsored by State Street Global Advisors. It has amassed assets over $5.48 billion, making it one of the largest ETFs attempting to match the performance of the Materials - Broad segment of the equity market. XLB seeks to match the performance of the Materials Select Sector Index before fees and expenses.
The Materials Select Sector Index seeks to provide an effective representation of the materials sector of the S&P 500 Index.
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 2.20%.
Sector Exposure and Top Holdings
ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Materials sector--about 100% of the portfolio.
Looking at individual holdings, Linde Plc (
LIN Quick Quote LIN - Free Report) accounts for about 17.46% of total assets, followed by Air Products And Chemicals Inc. ( APD Quick Quote APD - Free Report) and Sherwin-Williams Company ( SHW Quick Quote SHW - Free Report) .
The top 10 holdings account for about 62% of total assets under management.
Performance and Risk
Year-to-date, the Materials Select Sector SPDR ETF has lost about -15.93% so far, and is down about -11% over the last 12 months (as of 09/06/2022). XLB has traded between $70.93 and $90.61 in this past 52-week period.
The ETF has a beta of 1.04 and standard deviation of 27.05% for the trailing three-year period, making it a medium risk choice in the space. With about 30 holdings, it has more concentrated exposure than peers.
Materials Select Sector SPDR ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XLB is an outstanding option for investors seeking exposure to the Materials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
SPDR S&P Global Natural Resources ETF (
GNR Quick Quote GNR - Free Report) tracks S&P Global Natural Resources Index and the FlexShares Morningstar Global Upstream Natural Resources ETF ( GUNR Quick Quote GUNR - Free Report) tracks Morningstar Global Upstream Natural Resources Index. SPDR S&P Global Natural Resources ETF has $3.44 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $7.14 billion. GNR has an expense ratio of 0.40% and GUNR charges 0.46%. Bottom Line
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Zacks ETF Center.