A sound investment process and strong management team underpin Consumer Discret Sel Sect SPDR® ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy's investment process inspires confidence and earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in quality exposure and volatility exposure compared with category peers. 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 management team earns an Above Average People Pillar rating. 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

Amazon

Tesla

Home Depot

McDonald's

Lowe's

Booking Hlds

NIKE

Chipotle

Starbucks

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Consumer Discret Sel Sect SPDR® Fd earns an Above Average Process Pillar rating. The main driver of the rating is that this fund tracks an index. Historical data, such as 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 strengthens 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 investment results that, before expenses, correspond to the price and yield performance of publicly traded equity securities of companies in the Consumer Discretionary Select Sector Index.  The Advisor employs a replication strategy. The fund generally invests substantially all, but at least 95%, and of its total assets in the securities comprising the index. The index includes companies that have been identified as Consumer Discretionary companies by the Global Industry Classification Standard (GICS®). It is non-diversified. 

 The portfolio is overweight in consumer cyclical by 16.7 percentage points in terms of assets compared with the category average, and its financial services allocation is similar to the category. The sectors with low exposure compared to category peers are industrials and consumer defensive, underweight the average by 7.9 and 4.3 percentage points of assets, respectively. The strategy owns 54 securities and is relatively concentrated. In particular, 68.8% of the fund’s assets are housed within the top 10 holdings, as opposed to the typical peer's 44.1%. And in closing, in terms of portfolio turnover, on a year-over-year basis, 24% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Above 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, Kala O’Donnell. Experience on the team is abundant, with 18 years of average portfolio management experience. Together, they manage a total of seven strategies, with a Silver 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.

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

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XLY tracks a market-cap-weighted index of consumer-discretionary stocks drawn from the S&P 500.

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