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Should You Invest in the SPDR S&P Aerospace & Defense ETF (XAR)?

Sector ETF report for XAR

By
This story originally appeared on Zacks

The SPDR S&P Aerospace & Defense ETF (XAR) was launched on 09/28/2011, and is a passively managed exchange traded fund designed to offer broad exposure to the Industrials - Aerospace & Defense segment of the equity market.

- Zacks

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Industrials - Aerospace & Defense is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 13, placing it in bottom 19%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $1.24 billion, making it one of the average sized ETFs attempting to match the performance of the Industrials - Aerospace & Defense segment of the equity market. 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.

Costs

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 0.77%.

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 95.80% of the portfolio.

Looking at individual holdings, Virgin Galactic Holdings Inc (SPCE) accounts for about 4.82% of total assets, followed by Axon Enterprise Inc (AXON) and Maxar Technologies Inc. (MAXR).

The top 10 holdings account for about 39.77% of total assets under management.

Performance and Risk

So far this year, XAR has gained about 13.03%, and was up about 34.71% in the last one year (as of 10/26/2021). During this past 52-week period, the fund has traded between $84.30 and $136.44.

The ETF has a beta of 1.20 and standard deviation of 31.06% for the trailing three-year period, making it a medium risk choice in the space. With about 35 holdings, it has more concentrated exposure than peers.

Alternatives

SPDR S&P Aerospace & Defense ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, XAR is a good option for those seeking exposure to the Industrials ETFs area of the market. Investors might also want to consider some other ETF options in the space.

Invesco Aerospace & Defense ETF (PPA) tracks SPADE Defense Index and the iShares U.S. Aerospace & Defense ETF (ITA) tracks Dow Jones U.S. Select Aerospace & Defense Index. Invesco Aerospace & Defense ETF has $703.68 million in assets, iShares U.S. Aerospace & Defense ETF has $2.68 billion. PPA has an expense ratio of 0.59% and ITA charges 0.42%.

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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SPDR S&P Aerospace & Defense ETF (XAR): ETF Research Reports

 

Axon Enterprise, Inc (AXON): Free Stock Analysis Report

 

iShares U.S. Aerospace & Defense ETF (ITA): ETF Research Reports

 

Invesco Aerospace & Defense ETF (PPA): ETF Research Reports

 

Maxar Technologies Inc. (MAXR): Free Stock Analysis Report

 

Virgin Galactic Holdings, Inc. (SPCE): Free Stock Analysis Report

 

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