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Is SPDR S&P Transportation ETF (XTN) a Strong ETF Right Now?

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The SPDR S&P Transportation ETF (XTN - Free Report) was launched on 01/26/2011, and is a smart beta exchange traded fund designed to offer 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 offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

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.

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.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

The fund is managed by State Street Global Advisors, and has been able to amass over $220.79 million, which makes it one of the average sized ETFs in the Industrials ETFs. Before fees and expenses, XTN seeks to match the performance of the S&P Transportation Select Industry Index.

The S&P Transportation Select Industry Index represents the transportation segment of the S&P Total Market Index.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Operating expenses on an annual basis are 0.35% for XTN, making it one of the least expensive products in the space.

It's 12-month trailing dividend yield comes in at 0.84%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Industrials sector - about 100% of the portfolio.

Looking at individual holdings, Fedex Corporation (FDX - Free Report) accounts for about 2.68% of total assets, followed by Lyft Inc. Class A (LYFT - Free Report) and Joby Aviation Inc. (JOBY - Free Report) .

XTN's top 10 holdings account for about 24.82% of its total assets under management.

Performance and Risk

So far this year, XTN return is roughly 14.72%, and is down about -2.11% in the last one year (as of 06/08/2023). During this past 52-week period, the fund has traded between $63.53 and $82.32.

XTN has a beta of 1.32 and standard deviation of 26.98% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 49 holdings, it has more concentrated exposure than peers.

Alternatives

SPDR S&P Transportation 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.

IShares U.S. Transportation ETF (IYT - Free Report) tracks Dow Jones Transportation Average Index and the U.S. Global Jets ETF (JETS - Free Report) tracks U.S. Global Jets Index. IShares U.S. Transportation ETF has $870.79 million in assets, U.S. Global Jets ETF has $1.78 billion. IYT has an expense ratio of 0.39% and JETS charges 0.60%.

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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