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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?
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.
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.
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.
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
Because the fund has amassed over $1.99 billion, this makes it one of the larger ETFs in the Industrials ETFs. XAR is managed by State Street Global Advisors. This particular fund 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
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 XAR, making it one of the least expensive products in the space.
XAR's 12-month trailing dividend yield is 0.54%.
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.
This ETF has heaviest allocation in the Industrials sector - about 100% of the portfolio.
Taking into account 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) .
XAR's top 10 holdings account for about 43.94% of its total assets under management.
Performance and Risk
The ETF has added roughly 24.55% so far this year and it's up approximately 26.04% in the last one year (as of 12/28/2023). In the past 52-week period, it has traded between $109.44 and $136.33.
The fund has a beta of 1.08 and standard deviation of 22.64% 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 $2.62 billion in assets, iShares U.S. Aerospace & Defense ETF has $6.07 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?
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?
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.
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.
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.
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
Because the fund has amassed over $1.99 billion, this makes it one of the larger ETFs in the Industrials ETFs. XAR is managed by State Street Global Advisors. This particular fund 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
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 XAR, making it one of the least expensive products in the space.
XAR's 12-month trailing dividend yield is 0.54%.
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.
This ETF has heaviest allocation in the Industrials sector - about 100% of the portfolio.
Taking into account 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) .
XAR's top 10 holdings account for about 43.94% of its total assets under management.
Performance and Risk
The ETF has added roughly 24.55% so far this year and it's up approximately 26.04% in the last one year (as of 12/28/2023). In the past 52-week period, it has traded between $109.44 and $136.33.
The fund has a beta of 1.08 and standard deviation of 22.64% 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 $2.62 billion in assets, iShares U.S. Aerospace & Defense ETF has $6.07 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.