Sector ETFs For Exposure To Materials, Real Estate And Utilities

We conclude our four-part ETF exposure review of the 11 sectors of the world with today’s post.

The communication services, consumer staples, and consumer discretionary sectors were presented in the article. The article covered energy, finance, and healthcare. And the post looked at industrial and information technology stocks.

Today we turn to the materials, real estate and utilities sectors.

1. Materials

Key figures of the US Federal Reserve highlight:

“At 102.3% of the 2017 average, total industrial production in November was 5.3% above its previous year’s value and at its highest level since September 2019.”

The materials sector mainly comprises companies that supply raw materials or rely on raw materials in manufacturing and industrial production. According to the Organization for Economic Cooperation and Development (OECD), we are “experiencing an unprecedented increase in the demand for raw materials, driven in particular by the rapid industrialization of the emerging countries and the persistently high material consumption in the industrialized countries”.

Investors looking for access to companies in the construction, chemical, mining, packaging, paper or steel industries could consider the Materials Select Sector SPDR® Fund (NYSE :). The fund was launched in December 1998 and has more than $ 8.2 billion under management.

XLB with 28 positions follows the Materials Select Sector Index. Around 70% of the assets are in the top 10 names. In subsectors we see chemicals (69.23%), metals and mining (13.84%), containers and packaging (11.57%) and building materials (5.36%).

The leading names at XLB include: industrial gas and chemical companies Linden tree (NYSE 🙂 and Air products and chemicals (NYSE :), paints and coatings giant Sherwin-Williams (NYSE :), leading miners Freeport-McMoRan (NYSE 🙂 and Newmont Goldcorp (NYSE 🙂 and cleaning and disinfection group Ecolab (NYSE :).

In the past 52 weeks, XLB is up more than 24.5%. A record high has been reached in the past few days. The current price supports a dividend yield of 1.63%. The trailing P / E ratio and the P / E ratio are 17.40x and 3.43x, respectively. Despite the rise, we remain bullish on the sector.

Interested readers might also consider two other industry ETFs:

  • Vanguard Materials Index Fund ETF-Shares (NYSE 🙂
  • Invesco S&P 500® Equal Weight Materials ETF (NYSE 🙂

2. Real estate

The US Congressional Research Service (CRS) advises:

“Real estate and the housing market play an important role in the US economy. At the individual level, around 65% of the inhabited residential units are owner-occupied …. At the aggregated level, residential construction accounts for a considerable part of the overall economic activity. “

The Real Estate Select Sector SPDR® Fund (NYSE 🙂 invests in real estate management companies and equity real estate investment trusts (REITs). However, the fund excludes mortgage REITs (mREITs).

XLRE weekly chart

XLRE with 29 holdings was listed for the first time in October 2015. The top 10 stocks comprise more than 60% of net worth of $ 6.1 billion.

American tower (NYSE :), Prologis (NYSE :), Crown Castle International (NYSE :), Equinix (NASDAQ :), and Public storage (NYSE 🙂 are among the leading names in the fund.

For the year to date, XLRE has returned 39.7% and the dividend yield is 2.1%. Most analysts remain bullish on the sector amid inflationary pressures. However, P / E ratios of 46.29x and 4.36x indicate frothy valuation levels. Readers might consider investing around the $ 48 level.

Four more related ETFs to analyze:

  • Fidelity® MSCI Real Estate Index ETF (NYSE 🙂
  • Vanguard Real Estate Index Fund ETF-Shares (NYSE 🙂
  • iShares residential and multi-sector real estate ETF (NYSE 🙂
  • Schwab US REIT ETF ™ (NYSE 🙂

3. Utilities

The S&P utilities sector has been in the spotlight due to the transition to alternative energy sources. the Select utility sector SPDR® Fund (NYSE 🙂 invests in US electricity, gas and water utilities, as well as energy traders and producers

XLU weekly chart

XLU has 28 holdings and was first listed in December 2018. The net worth is well over $ 13 billion. Among the top names in the fund are NextEra energy (NYSE :), Duke of Energy (NYSE :), south (NYSE :), Power of domination (NYSE :), and Exelon (NASDAQ :).

YTD, the ETF is up more than 12.8%. The current price supports a dividend yield of 2.8%. The trailing PER is 27.60x. Interested readers might consider waiting for a pullback towards the $ 68 mark.

Finally, there would be three more sectoral ETFs that you should have on your radar:

  • Vanguard Utilities Index Fund ETF-Shares (NYSE 🙂
  • Fidelity® MSCI Utilities Index ETF (NYSE 🙂
  • Invesco S&P 500® Equal Weight Utilities ETF (NYSE 🙂