Should You Invest in the Materials Select Sector SPDR ETF (XLB)?
If you're interested in broad exposure to the Materials - Broad segment of the equity market, look no further than the Materials Select Sector SPDR ETF (XLB), a passively managed exchange traded fund launched on 12/16/1998.
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. Materials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 15, placing it in bottom 6%.
Index Details
The fund is sponsored by State Street Global Advisors. It has amassed assets over $5.52 billion, making it one of the largest ETFs attempting to match the performance of the Materials - Broad segment of the equity market. XLB seeks to match the performance of the Materials Select Sector Index before fees and expenses.
The Materials Select Sector Index seeks to provide an effective representation of the materials sector of the S&P 500 Index.
Costs
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 2.07%.
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 Materials sector--about 100% of the portfolio.
Looking at individual holdings, Linde Plc (LIN) accounts for about 20.58% of total assets, followed by Sherwin Williams Co/the (SHW) and Freeport Mcmoran Inc (FCX).
The top 10 holdings account for about 65.83% of total assets under management.
Performance and Risk
The ETF has lost about -3.27% so far this year and it's up approximately 1.69% in the last one year (as of 01/24/2024). In that past 52-week period, it has traded between $74.46 and $86.21.
The ETF has a beta of 1.08 and standard deviation of 19.81% for the trailing three-year period, making it a medium risk choice in the space. With about 32 holdings, it has more concentrated exposure than peers.
Alternatives
Materials Select Sector SPDR 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, XLB is a sufficient option for those seeking exposure to the Materials ETFs area of the market. Investors might also want to consider some other ETF options in the space.
SPDR S&P Global Natural Resources ETF (GNR) tracks S&P Global Natural Resources Index and the FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR) tracks Morningstar Global Upstream Natural Resources Index. SPDR S&P Global Natural Resources ETF has $3.71 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $6.29 billion. GNR has an expense ratio of 0.40% and GUNR charges 0.46%.
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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Materials Select Sector SPDR ETF (XLB): ETF Research Reports
Freeport-McMoRan Inc. (FCX) : Free Stock Analysis Report
The Sherwin-Williams Company (SHW) : Free Stock Analysis Report
Linde PLC (LIN) : Free Stock Analysis Report
SPDR S&P Global Natural Resources ETF (GNR): ETF Research Reports
FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR): ETF Research Reports
