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Is SPDR S&P Aerospace & Defense ETF (XAR) a Strong ETF Right Now?
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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?
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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
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
XAR is managed by State Street Global Advisors, and this fund has amassed over $1.56 billion, which makes 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.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.43%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
For XAR, it has heaviest allocation in the Industrials sector --about 100% of the portfolio.
When you look at individual holdings, Northrop Grumman Corp (NOC - Free Report) accounts for about 4.81% of the fund's total assets, followed by General Dynamics Corp (GD - Free Report) and Bwx Technologies Inc (BWXT - Free Report) .
The top 10 holdings account for about 43.94% of total assets under management.
Performance and Risk
The ETF has gained about 3.98% and was up about 11.82% so far this year and in the past one year (as of 10/27/2023), respectively. XAR has traded between $104.30 and $125.09 during this last 52-week period.
The fund has a beta of 1.10 and standard deviation of 23.62% for the trailing three-year period, which makes XAR a medium risk choice in this particular space. With about 34 holdings, it has more concentrated exposure than peers.
Alternatives
SPDR S&P Aerospace & Defense 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.
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 $2.07 billion in assets, iShares U.S. Aerospace & Defense ETF has $5.06 billion. PPA has an expense ratio of 0.58% and ITA charges 0.40%.
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?
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?
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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
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
XAR is managed by State Street Global Advisors, and this fund has amassed over $1.56 billion, which makes 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.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.43%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
For XAR, it has heaviest allocation in the Industrials sector --about 100% of the portfolio.
When you look at individual holdings, Northrop Grumman Corp (NOC - Free Report) accounts for about 4.81% of the fund's total assets, followed by General Dynamics Corp (GD - Free Report) and Bwx Technologies Inc (BWXT - Free Report) .
The top 10 holdings account for about 43.94% of total assets under management.
Performance and Risk
The ETF has gained about 3.98% and was up about 11.82% so far this year and in the past one year (as of 10/27/2023), respectively. XAR has traded between $104.30 and $125.09 during this last 52-week period.
The fund has a beta of 1.10 and standard deviation of 23.62% for the trailing three-year period, which makes XAR a medium risk choice in this particular space. With about 34 holdings, it has more concentrated exposure than peers.
Alternatives
SPDR S&P Aerospace & Defense 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.
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 $2.07 billion in assets, iShares U.S. Aerospace & Defense ETF has $5.06 billion. PPA has an expense ratio of 0.58% and ITA charges 0.40%.
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.