Should You Invest in the Materials Select Sector SPDR ETF (XLB)?
Looking for broad exposure to the Materials - Broad segment of the equity market? You should consider 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.
Sector ETFs are also funds of convenience, offering many 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 10, placing it in bottom 38%.
Index Details
The fund is sponsored by State Street Global Advisors. It has amassed assets over $5.74 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for this ETF are 0.09%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.90%.
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 Materials sector--about 100% of the portfolio.
Looking at individual holdings, Linde Plc (LIN) accounts for about 21.19% of total assets, followed by Sherwin Williams Co/the (SHW) and Freeport Mcmoran Inc (FCX).
The top 10 holdings account for about 66.73% of total assets under management.
Performance and Risk
The ETF has added roughly 7.83% and it's up approximately 9.33% so far this year and in the past one year (as of 07/30/2024), respectively. XLB has traded between $74.46 and $93.06 during this last 52-week period.
The ETF has a beta of 1.07 and standard deviation of 19.14% for the trailing three-year period, making it a medium risk choice in the space. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
Materials Select Sector SPDR ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XLB is a great option for investors seeking exposure to the Materials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
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 $3.11 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $5.80 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