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Is SPDR S&P Transportation ETF (XTN) a Strong ETF Right Now?

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A smart beta exchange traded fund, the SPDR S&P Transportation ETF (XTN - Free Report) debuted on 01/26/2011, and offers 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.

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.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

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

Because the fund has amassed over $407.44 million, this makes it one of the average sized ETFs in the Industrials ETFs. XTN is managed by State Street Global Advisors. XTN, before fees and expenses, seeks to match the performance of the S&P Transportation Select Industry Index.

The S&P Transportation Select Industry Index represents the transportation segment of the S&P Total Market Index.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Operating expenses on an annual basis are 0.35% for this ETF, which makes it one of the least expensive products in the space.

The fund has a 12-month trailing dividend yield of 1.13%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Industrials sector - about 100% of the portfolio.

Taking into account individual holdings, Atlas Air Worldwide Holdings Inc. (AAWW - Free Report) accounts for about 3.13% of the fund's total assets, followed by Frontier Group Holdings Inc. (ULCC - Free Report) and Amerco .

XTN's top 10 holdings account for about 25.1% of its total assets under management.

Performance and Risk

Year-to-date, the SPDR S&P Transportation ETF has lost about -31.22% so far, and is down about -26.95% over the last 12 months (as of 09/28/2022). XTN has traded between $63.53 and $98.74 in this past 52-week period.

The ETF has a beta of 1.30 and standard deviation of 31.93% for the trailing three-year period, making it a high risk choice in the space. With about 51 holdings, it effectively diversifies company-specific risk.

Alternatives

SPDR S&P Transportation ETF is an excellent option for investors seeking to outperform the Industrials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.

IShares U.S. Transportation ETF (IYT - Free Report) tracks Dow Jones Transportation Average Index and the U.S. Global Jets ETF (JETS - Free Report) tracks U.S. Global Jets Index. IShares U.S. Transportation ETF has $718.49 million in assets, U.S. Global Jets ETF has $2.04 billion. IYT has an expense ratio of 0.39% and JETS charges 0.60%.

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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