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

Zacks Equity Research
·4-min read

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.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Industrials - Aerospace & Defense is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 16, placing it in bottom 0%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $1.11 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.

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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 0.84%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. 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, Spirit Aerosystems Holdings Inc. Class A (SPR) accounts for about 4.69% of total assets, followed by Heico Corporation (HEI) and Raytheon Technologies Corporation (RTX).

The top 10 holdings account for about 43.77% of total assets under management.

Performance and Risk

The ETF has added about 6.40% so far this year and was up about 2.53% in the last one year (as of 12/31/2021). In that past 52-week period, it has traded between $109.09 and $136.44.

The ETF has a beta of 1.16 and standard deviation of 30.86% for the trailing three-year period, making it 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 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 $653.77 million in assets, iShares U.S. Aerospace & Defense ETF has $2.50 billion. PPA has an expense ratio of 0.61% 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
 
Spirit Aerosystems Holdings, Inc. (SPR) : Free Stock Analysis Report
 
Heico Corporation (HEI) : Free Stock Analysis Report
 
iShares U.S. Aerospace & Defense ETF (ITA): ETF Research Reports
 
Invesco Aerospace & Defense ETF (PPA): ETF Research Reports
 
Raytheon Technologies Corporation (RTX) : Free Stock Analysis Report
 
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