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Should You Invest in the Industrial Select Sector SPDR ETF (XLI)?

Sector ETF report for XLI

By
This story originally appeared on Zacks

The Industrial Select Sector SPDR ETF (XLI) was launched on 12/16/1998, and is a passively managed exchange traded fund designed to offer broad exposure to the Industrials - Broad segment of the equity market.

- Zacks

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Industrials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 11, placing it in bottom 31%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $17.37 billion, making it the largest ETF attempting to match the performance of the Industrials - Broad segment of the equity market. XLI seeks to match the performance of the Industrial Select Sector Index before fees and expenses.

The Industrial Select Sector Index includes companies from the following industries: industrial conglomerates; aerospace & defense; machinery; air freight & logistics; road & rail; commercial services & supplies; electrical equipment; construction & engineering; building products; airlines; and trading companies & distributors.

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 0.12%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.25%.

Sector Exposure and Top Holdings

ETFs offer a 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, Union Pacific Corporation (UNP) accounts for about 4.94% of total assets, followed by United Parcel Service Inc. Class B (UPS) and Honeywell International Inc. (HON).

The top 10 holdings account for about 36.33% of total assets under management.

Performance and Risk

Year-to-date, the Industrial Select Sector SPDR ETF has gained about 23.46% so far, and was up about 21.03% over the last 12 months (as of 12/31/2021). XLI has traded between $84.77 and $107.12 in this past 52-week period.

The ETF has a beta of 1.18 and standard deviation of 26.15% for the trailing three-year period, making it a medium risk choice in the space. With about 76 holdings, it effectively diversifies company-specific risk.

Alternatives

Industrial Select Sector SPDR ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XLI is an excellent option for investors seeking exposure to the Industrials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

First Trust IndustrialsProducer Durables AlphaDEX ETF (FXR) tracks StrataQuant Industrials Index and the Vanguard Industrials ETF (VIS) tracks MSCI US Investable Market Industrials 25/50 Index. First Trust IndustrialsProducer Durables AlphaDEX ETF has $1.90 billion in assets, Vanguard Industrials ETF has $5.23 billion. FXR has an expense ratio of 0.61% and VIS charges 0.10%.

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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Industrial Select Sector SPDR ETF (XLI): ETF Research Reports

 

Honeywell International Inc. (HON): Free Stock Analysis Report

 

Union Pacific Corporation (UNP): Free Stock Analysis Report

 

United Parcel Service, Inc. (UPS): Free Stock Analysis Report

 

Vanguard Industrials ETF (VIS): ETF Research Reports

 

First Trust IndustrialsProducer Durables AlphaDEX ETF (FXR): ETF Research Reports

 

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