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
Launched on 09/28/2011, the SPDR S&P Aerospace & Defense ETF (XAR - Free Report) is a smart beta exchange traded fund offering broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate 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 seeks to match the performance of the S&P Aerospace & Defense Select Industry Index before fees and expenses.
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.
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 0.47%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. 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, 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 4.65%, and is down about -6.56% in the last one year (as of 04/10/2023). During this past 52-week period, the fund has traded between $91.68 and $125.15.
The fund has a beta of 1.08 and standard deviation of 27.70% for the trailing three-year period, which makes XAR a medium risk choice in this particular 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 $1.85 billion in assets, iShares U.S. Aerospace & Defense ETF has $5.78 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.
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?
Launched on 09/28/2011, the SPDR S&P Aerospace & Defense ETF (XAR - Free Report) is a smart beta exchange traded fund offering broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate 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 seeks to match the performance of the S&P Aerospace & Defense Select Industry Index before fees and expenses.
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.
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 0.47%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. 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, 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 4.65%, and is down about -6.56% in the last one year (as of 04/10/2023). During this past 52-week period, the fund has traded between $91.68 and $125.15.
The fund has a beta of 1.08 and standard deviation of 27.70% for the trailing three-year period, which makes XAR a medium risk choice in this particular 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 $1.85 billion in assets, iShares U.S. Aerospace & Defense ETF has $5.78 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.