Designed to provide broad exposure to the Industrials ETFs category of the market, the SPDR S&P Transportation ETF (XTN) is a smart beta exchange traded fund launched on 01/26/2011.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors, and has been able to amass over $277.38 million, which makes it one of the average sized ETFs in the Industrials ETFs. Before fees and expenses, this particular fund seeks to match the performance of the S&P Transportation Select Industry Index.
The S&P Transportation Select Industry Index represents the transportation segment of the S&P Total Market Index.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.
XTN's 12-month trailing dividend yield is 0.73%.
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.
For XTN, it has heaviest allocation in the Industrials sector --about 100% of the portfolio.
Looking at individual holdings, United Airlines Holdings Inc (UAL) accounts for about 3.84% of total assets, followed by Skywest Inc (SKYW) and Delta Air Lines Inc (DAL).
Its top 10 holdings account for approximately 30.84% of XTN's total assets under management.
Performance and Risk
The ETF has added roughly 14.66% and is up about 29.21% so far this year and in the past one year (as of 11/26/2024), respectively. XTN has traded between $73.55 and $95.17 during this last 52-week period.
The fund has a beta of 1.32 and standard deviation of 25.69% for the trailing three-year period, which makes XTN a high risk choice in this particular space. With about 46 holdings, it has more concentrated exposure than peers.
Alternatives
SPDR S&P Transportation ETF is a reasonable option for investors seeking to outperform the Industrials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
IShares U.S. Transportation ETF (IYT) tracks Dow Jones Transportation Average Index and the U.S. Global Jets ETF (JETS) tracks U.S. Global Jets Index. IShares U.S. Transportation ETF has $796.42 million in assets, U.S. Global Jets ETF has $1.08 billion. IYT has an expense ratio of 0.39% and JETS charges 0.60%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Industrials ETFs.
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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Get it free >>SPDR S&P Transportation ETF (XTN): ETF Research Reports
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
SkyWest, Inc. (SKYW) : Free Stock Analysis Report
iShares U.S. Transportation ETF (IYT): ETF Research Reports
U.S. Global Jets ETF (JETS): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
