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Is SPDR S&P Aerospace & Defense ETF (XAR) a Strong ETF Right Now?
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Making its debut on 09/28/2011, smart beta exchange traded fund SPDR S&P Aerospace & Defense ETF (XAR - Free Report) provides investors 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.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
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 $2.03 billion, making it one of the larger ETFs in the Industrials ETFs. This particular fund, 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 XAR are 0.35%, which makes it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 0.54%.
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.
For XAR, it has heaviest allocation in the Industrials sector --about 100% of the portfolio.
Taking into account individual holdings, Spirit Aerosystems Hold Cl A (SPR - Free Report) accounts for about 5.38% of the fund's total assets, followed by L3harris Technologies Inc (LHX - Free Report) and Huntington Ingalls Industrie (HII - Free Report) .
XAR's top 10 holdings account for about 42.89% of its total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Aerospace & Defense ETF has added about 1.18% so far, and is up roughly 15.95% over the last 12 months (as of 02/29/2024). XAR has traded between $109.60 and $137.02 in this past 52-week period.
The fund has a beta of 1.06 and standard deviation of 21.94% 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 $2.83 billion in assets, iShares U.S. Aerospace & Defense ETF has $6.01 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?
Making its debut on 09/28/2011, smart beta exchange traded fund SPDR S&P Aerospace & Defense ETF (XAR - Free Report) provides investors 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.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
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 $2.03 billion, making it one of the larger ETFs in the Industrials ETFs. This particular fund, 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 XAR are 0.35%, which makes it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 0.54%.
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.
For XAR, it has heaviest allocation in the Industrials sector --about 100% of the portfolio.
Taking into account individual holdings, Spirit Aerosystems Hold Cl A (SPR - Free Report) accounts for about 5.38% of the fund's total assets, followed by L3harris Technologies Inc (LHX - Free Report) and Huntington Ingalls Industrie (HII - Free Report) .
XAR's top 10 holdings account for about 42.89% of its total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Aerospace & Defense ETF has added about 1.18% so far, and is up roughly 15.95% over the last 12 months (as of 02/29/2024). XAR has traded between $109.60 and $137.02 in this past 52-week period.
The fund has a beta of 1.06 and standard deviation of 21.94% 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 $2.83 billion in assets, iShares U.S. Aerospace & Defense ETF has $6.01 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.