Should You Invest in the SPDR S&P Aerospace & Defense ETF (XAR)?
Designed to provide broad exposure to the Industrials - Aerospace & Defense segment of the equity market, the SPDR S&P Aerospace & Defense ETF (XAR) is a passively managed exchange traded fund launched on 09/28/2011.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
Investor-friendly, sector ETFs provide many options 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 12, placing it in bottom 25%.
Index Details
The fund is sponsored by State Street Global Advisors. It has amassed assets over $1.38 billion, making it one of the larger 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 0.49%.
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, Rocket Lab Usa Inc. (RKLB) accounts for about 4.24% of total assets, followed by Axon Enterprise Inc (AXON) and Boeing Company (BA).
The top 10 holdings account for about 38.41% of total assets under management.
Performance and Risk
The ETF has added roughly 2.59% and is down about -3.52% so far this year and in the past one year (as of 01/09/2023), respectively. XAR has traded between $91.68 and $126.95 during this last 52-week period.
The ETF has a beta of 1.08 and standard deviation of 33.41% for the trailing three-year period, making it a medium risk choice in the space. With about 36 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 sufficient 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 $1.71 billion in assets, iShares U.S. Aerospace & Defense ETF has $4.78 billion. PPA has an expense ratio of 0.58% and ITA charges 0.39%.
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
The Boeing Company (BA) : Free Stock Analysis Report
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
Rocket Lab USA, Inc. (RKLB) : Free Stock Analysis Report
