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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?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
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.
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
Managed by State Street Global Advisors, XAR has amassed assets over $2.27 billion, making it one of the largest 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.
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 0.53%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Industrials sector - about 100% of the portfolio.
When you look at individual holdings, Axon Enterprise Inc (AXON - Free Report) accounts for about 5.53% of the fund's total assets, followed by Lockheed Martin Corp (LMT - Free Report) and Spirit Aerosystems Hold Cl A (SPR - Free Report) .
The top 10 holdings account for about 49.96% of total assets under management.
Performance and Risk
So far this year, XAR has gained about 11.63%, and it's up approximately 23.87% in the last one year (as of 09/04/2024). During this past 52-week period, the fund has traded between $109.60 and $155.51.
XAR has a beta of 1.08 and standard deviation of 21.40% for the trailing three-year period, which makes the fund a medium risk choice in the 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 $3.71 billion in assets, iShares U.S. Aerospace & Defense ETF has $6.47 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?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
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.
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
Managed by State Street Global Advisors, XAR has amassed assets over $2.27 billion, making it one of the largest 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.
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 0.53%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Industrials sector - about 100% of the portfolio.
When you look at individual holdings, Axon Enterprise Inc (AXON - Free Report) accounts for about 5.53% of the fund's total assets, followed by Lockheed Martin Corp (LMT - Free Report) and Spirit Aerosystems Hold Cl A (SPR - Free Report) .
The top 10 holdings account for about 49.96% of total assets under management.
Performance and Risk
So far this year, XAR has gained about 11.63%, and it's up approximately 23.87% in the last one year (as of 09/04/2024). During this past 52-week period, the fund has traded between $109.60 and $155.51.
XAR has a beta of 1.08 and standard deviation of 21.40% for the trailing three-year period, which makes the fund a medium risk choice in the 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 $3.71 billion in assets, iShares U.S. Aerospace & Defense ETF has $6.47 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.