Should You Invest in the Industrial Select Sector SPDR ETF (XLI)?

Launched on 12/16/1998, the Industrial Select Sector SPDR ETF (XLI) is a passively managed exchange traded fund designed to provide a broad exposure to the Industrials - Broad segment of the equity market.

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 - 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 $18.43 billion, making it the largest ETF attempting to match the performance of the Industrials - Broad segment of the equity market. XLI seeks to match the performance of the Industrial Select Sector Index before fees and expenses.

The Industrial Select Sector Index includes companies from the following industries: industrial conglomerates; aerospace & defense; machinery; air freight & logistics; road & rail; commercial services & supplies; electrical equipment; construction & engineering; building products; airlines; and trading companies & distributors.

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 0.09%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.48%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many 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, General Electric Co (GE) accounts for about 4.92% of total assets, followed by Caterpillar Inc (CAT) and Uber Technologies Inc (UBER).

The top 10 holdings account for about 36.28% of total assets under management.

Performance and Risk

The ETF has added about 9.52% and it's up approximately 28.43% so far this year and in the past one year (as of 05/28/2024), respectively. XLI has traded between $96.44 and $125.96 during this last 52-week period.

The ETF has a beta of 1.09 and standard deviation of 17.02% for the trailing three-year period, making it a medium risk choice in the space. With about 81 holdings, it effectively diversifies company-specific risk.

Alternatives

Industrial 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, XLI is an excellent option for investors seeking exposure to the Industrials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

First Trust Industrials/Producer Durables AlphaDEX ETF (FXR) tracks StrataQuant Industrials Index and the Vanguard Industrials ETF (VIS) tracks MSCI US Investable Market Industrials 25/50 Index. First Trust Industrials/Producer Durables AlphaDEX ETF has $1.93 billion in assets, Vanguard Industrials ETF has $5.34 billion. FXR has an expense ratio of 0.61% and VIS charges 0.10%.

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.

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 >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Industrial Select Sector SPDR ETF (XLI): ETF Research Reports

GE Aerospace (GE) : Free Stock Analysis Report

Caterpillar Inc. (CAT) : Free Stock Analysis Report

Vanguard Industrials ETF (VIS): ETF Research Reports

First Trust Industrials/Producer Durables AlphaDEX ETF (FXR): ETF Research Reports

Uber Technologies, Inc. (UBER) : Free Stock Analysis Report

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.

Tags

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.