Materials Select Sector SPDR® ETF’s Process Pillar rating is Average, but a strong management team still helps this strategy retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy’s management team earns an Above Average People Pillar rating. The strategy gets an Average Process Pillar rating.  Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And low volatility exposure is rooted in stocks that have a lower standard deviation of returns. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Linde

Sherwin-Williams

Air Products and Chemicals

Freeport-McMoRan

Ecolab

Newmont Mining

Nucor

Dow Inc

DuPont de Nemours

PPG Industries

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. Materials Select Sector SPDR® Fund earns an Average Process Pillar rating. The main contributor to the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Excellent risk-adjusted performance also contributes to the process. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the process was successful over that period. 

The investment strategy as stated in the fund's prospectus is:  The investment seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of publicly traded equity securities of companies in the Materials Select Sector Index.  In seeking to track the performance of the index, the fund employs a replication strategy. It generally invests substantially all, but at least 95%, and of its total assets in the securities comprising the index. The index includes securities of companies from the following industries: chemicals; metals and mining; paper and forest products; containers and packaging; and construction materials. The fund is non-diversified. 

 The portfolio is overweight in basic materials and consumer cyclical relative to the category average by 43.0 and 6.1 percentage points, respectively. The sectors with low exposure compared to category peers are energy and industrials, underweight the average by 28.8 and 9.2 percentage points of assets, respectively. The portfolio is positioned across 32 holdings and is relatively concentrated. Specifically, 66.0% of the fund’s assets are housed within the top 10 holdings, as opposed to the category’s 23.0% average.

Average

Process

State Street’s equity team is strong compared with others in the industry, resulting in an Above Average People Pillar rating. There are two managers listed on the fund: Karl Schneider, Ted Janowsky. The team is well equipped, with an average of 21 years of portfolio management experience. Together, they manage a total of six strategies, with a Bronze asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha relative to the category median in aggregate.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Above Average

People

State Street Global Advisors is under new leadership but continues to move along the positive trajectory established by former leaders. SSGA maintains its Above Average Parent Pillar rating.
Cyrus Taraporevala, who oversaw much of SSGA’s recent transformation, retired from the CEO position in December 2022 and passed the baton to his successor, Yie-Hsin Hung. She inherited a business that’s become more disciplined with its fund lineup. Fees have come down, while product development remains focused on fixed-income and sustainability funds, and many of SSGA’s launches have echoed that intention.
The seeds that SSGA planted over the past several years have been bearing fruit. It built out a low-cost series of portfolio building-block ETFs in the U.S. bearing the “SPDR Portfolio” branding. SSGA launched these later than its industry rivals, so they aren’t as large. But they’re competitive, with solid management and low fees, which helped them consistently take in new money over the past several years.
SSGA continued to overhaul its ETF business in Europe with most of its recent fixed-income and sustainability fund launches. Many of these funds track indexes and charge relatively low fees. With operations in the U.S. and Europe standing on a firm foundation, SSGA will put more focus on its Asia-Pacific business—the smallest regional segment of its business.

Parent

Materials Select Sector SPDR Fund

XLB tracks a market-cap-weighted index of US basic materials companies. The fund includes only the materials components of the S&P 500.

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.

Should You Invest in the Materials Select Sector SPDR ETF (XLB)?

Materials Select Sector SPDR Fund has outperformed the S&P 500 by 13% since the start of the pandemic rebound. XLB is a sector ETF that focuses on the basic materials sector, which is often overlooked by investors. The chemical industry, which makes up a significant portion of XLB's holdings, is rebounding and experiencing growth, but faces competition and volatility.

XLB: The ETF That Beat The S&P 500

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Materials Select Sector SPDR Fund ETF is a passively managed fund that replicates S&P's Materials Select Sector Index. The fund is top-heavy, with the top 10 stocks accounting for 66% of its total weight, and Linde plc alone accounting for 20%. The materials sector is highly cyclical and dependent on global economic growth, with concerns about the Chinese economy potentially impacting the sector.

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The Materials Select Sector SPDR® Fund ETF offers exposure to the materials sector of the S&P 500 Index. The XLB ETF's portfolio is concentrated in the chemicals industry, with strong earnings growth, but also has exposure to containers & packaging and construction materials. XLB has underperformed the S&P 500 and is heavily dependent on the performance of the chemicals industry.

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While some of the major players seem to have less chances of beating earnings estimates, the sector is expected to post a earnings decline of 40.3%.

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For long-term investors, the Materials Select Sector SPDR Fund ETF presents a good buying opportunity. The materials sector trades at a discount, with a forward P/E of 16.7 versus the S&P 500's 18.5 times forward earnings, offering potential upside. The chemicals industry's earnings growth power is likely to support the share price and dividends.

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Top-Ranked ETFs like Global X Social Media Index ETF (SOCL), VanEck Vectors Semiconductor ETF (SMH), First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (GRID), Materials Select Sector SPDR (XLB), and SPDR NYSE Technology ETF (XNTK) outperformed last month.

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XLB is a pretty small ETF skewed towards industrial gases in particular, but also other materials and basic materials more broadly. The key exposures look rather solid despite macroeconomic headwinds, and the US focus of the ETF is also attractive as that market is better than Europe in terms of macro.

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News for Materials Select Sector SPDR Fund ETF (XLB)