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.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.
Additionally, sector ETFs offer convenient 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%.
The fund is sponsored by State Street Global Advisors. It has amassed assets over $1.26 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 US 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.
When considering an ETF’s total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
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 0.44%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund’s holdings before investing. Luckily, 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.
Looking at individual holdings, Mercury Systems Inc. (MRCY) accounts for about 5.59% of total assets, followed by Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC).
The top 10 holdings account for about 46.24% of total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Aerospace & Defense ETF has lost about -12.99% so far, and is down about -22.80% over the last 12 months (as of 07/05/2022). XAR has traded between $96.26 and $132.54 in this past 52-week period.
The ETF has a beta of 1.08 and standard deviation of 32.31% for the trailing three-year period, making it a medium risk choice in the space. With about 33 holdings, it has more concentrated exposure than peers.
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 reasonable 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 US Aerospace & Defense ETF (ITA) tracks Dow Jones US Select Aerospace & Defense Index. Invesco Aerospace & Defense ETF has $1.28 billion in assets, iShares US Aerospace & Defense ETF has $3.73 billion. PPA has an expense ratio of 0.61% and ITA charges 0.42%.
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.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.
Get it free >>
Click to get this free report
SPDR S&P Aerospace & Defense ETF (XAR): ETF Research Reports
Lockheed Martin Corporation (LMT): Free Stock Analysis Report
Northrop Grumman Corporation (NOC): Free Stock Analysis Report
Mercury Systems Inc (MRCY): Free Stock Analysis Report
iShares US Aerospace & Defense ETF (ITA): ETF Research Reports
Invesco Aerospace & Defense ETF (PPA): ETF Research Reports
To read this article on Zacks.com click here.
Zacks Investment Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.