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Is SPDR S&P Aerospace & Defense ETF (XAR) a Strong ETF Right Now?
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Designed to provide broad exposure to the Industrials ETFs category of the market, the SPDR S&P Aerospace & Defense ETF (XAR - Free Report) is a smart beta exchange traded fund launched on 09/28/2011.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors. XAR has been able to amass assets over $1.51 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.
XAR's 12-month trailing dividend yield is 0.45%.
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.
Representing 100% of the portfolio, the fund has heaviest allocation to the Industrials sector.
Looking at individual holdings, Spirit Aerosystems Holdings Inc. Class A (SPR - Free Report) accounts for about 4.25% of total assets, followed by Axon Enterprise Inc (AXON - Free Report) and Lockheed Martin Corporation (LMT - Free Report) .
The top 10 holdings account for about 40.2% of total assets under management.
Performance and Risk
The ETF has gained about 9.30% so far this year and is up roughly 20.76% in the last one year (as of 06/14/2023). In the past 52-week period, it has traded between $91.68 and $121.62.
The fund has a beta of 1.08 and standard deviation of 24.67% 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 $1.90 billion in assets, iShares U.S. Aerospace & Defense ETF has $5.83 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?
Designed to provide broad exposure to the Industrials ETFs category of the market, the SPDR S&P Aerospace & Defense ETF (XAR - Free Report) is a smart beta exchange traded fund launched on 09/28/2011.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors. XAR has been able to amass assets over $1.51 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.
XAR's 12-month trailing dividend yield is 0.45%.
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.
Representing 100% of the portfolio, the fund has heaviest allocation to the Industrials sector.
Looking at individual holdings, Spirit Aerosystems Holdings Inc. Class A (SPR - Free Report) accounts for about 4.25% of total assets, followed by Axon Enterprise Inc (AXON - Free Report) and Lockheed Martin Corporation (LMT - Free Report) .
The top 10 holdings account for about 40.2% of total assets under management.
Performance and Risk
The ETF has gained about 9.30% so far this year and is up roughly 20.76% in the last one year (as of 06/14/2023). In the past 52-week period, it has traded between $91.68 and $121.62.
The fund has a beta of 1.08 and standard deviation of 24.67% 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 $1.90 billion in assets, iShares U.S. Aerospace & Defense ETF has $5.83 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.