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Is SPDR S&P Aerospace & Defense ETF (XAR) a Strong ETF Right Now?
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The SPDR S&P Aerospace & Defense ETF (XAR - Free Report) made its debut on 09/28/2011, and is a smart beta exchange traded fund that provides broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors. XAR has been able to amass assets over $1.47 billion, making it one of the larger ETFs in the Industrials ETFs. XAR, 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.
It's 12-month trailing dividend yield comes in at 0.46%.
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.
Representing 100% of the portfolio, the fund has heaviest allocation to the Industrials sector.
Taking into account individual holdings, Axon Enterprise Inc (AXON - Free Report) accounts for about 5.10% of the fund's total assets, followed by Aerojet Rocketdyne Holdings Inc. and Curtiss-Wright Corporation (CW - Free Report) .
XAR's top 10 holdings account for about 42.95% of its total assets under management.
Performance and Risk
So far this year, XAR has added about 8.11%, and was up about 8.56% in the last one year (as of 02/06/2023). During this past 52-week period, the fund has traded between $91.68 and $126.95.
XAR has a beta of 1.09 and standard deviation of 33.47% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 35 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 $1.74 billion in assets, iShares U.S. Aerospace & Defense ETF has $5.20 billion. PPA has an expense ratio of 0.58% 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.
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Is SPDR S&P Aerospace & Defense ETF (XAR) a Strong ETF Right Now?
The SPDR S&P Aerospace & Defense ETF (XAR - Free Report) made its debut on 09/28/2011, and is a smart beta exchange traded fund that provides broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors. XAR has been able to amass assets over $1.47 billion, making it one of the larger ETFs in the Industrials ETFs. XAR, 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.
It's 12-month trailing dividend yield comes in at 0.46%.
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.
Representing 100% of the portfolio, the fund has heaviest allocation to the Industrials sector.
Taking into account individual holdings, Axon Enterprise Inc (AXON - Free Report) accounts for about 5.10% of the fund's total assets, followed by Aerojet Rocketdyne Holdings Inc. and Curtiss-Wright Corporation (CW - Free Report) .
XAR's top 10 holdings account for about 42.95% of its total assets under management.
Performance and Risk
So far this year, XAR has added about 8.11%, and was up about 8.56% in the last one year (as of 02/06/2023). During this past 52-week period, the fund has traded between $91.68 and $126.95.
XAR has a beta of 1.09 and standard deviation of 33.47% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 35 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 $1.74 billion in assets, iShares U.S. Aerospace & Defense ETF has $5.20 billion. PPA has an expense ratio of 0.58% 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.