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.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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 4, placing it in top 25%.
Index Details
The fund is sponsored by State Street Global Advisors. It has amassed assets over $7.92 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
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 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.66%.
Sector Exposure and Top Holdings
It is important to delve into an ETF’s holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. 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 15.50% of total assets, followed by Freeport-Mcmoran Inc. (FCX) and Sherwin-Williams Company (SHW).
The top 10 holdings account for about 62.39% of total assets under management.
Performance and Risk
So far this year, XLB has lost about -0.68%, and is up about 5.59% in the last one year (as of 05/05/2022). During this past 52-week period, the fund has traded between $79.11 and $90.61.
The ETF has a beta of 1.03 and standard deviation of 26.32% for the trailing three-year period, making it a medium risk choice in the space. With about 30 holdings, it has more concentrated exposure than peers.
Alternatives
Materials Select Sector SPDR ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XLB is an excellent 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.
Vanguard Materials ETF (VAW) tracks MSCI US Investable Market Materials 25/50 Index and the FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR) tracks Morningstar Global Upstream Natural Resources Index. Vanguard Materials ETF has $4.14 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $8.43 billion. VAW has an expense ratio of 0.10% 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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