Is State Street SPDR S&P Telecom ETF (XTL) a Strong ETF Right Now?

Launched on 01/26/2011, the State Street SPDR S&P Telecom ETF (XTL) is a smart beta exchange traded fund offering broad exposure to the Communication Services ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well 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.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

The fund is managed by State Street Investment Management. XTL has been able to amass assets over $217.97 million, making it one of the average sized ETFs in the Communication Services ETFs. XTL, before fees and expenses, seeks to match the performance of the S&P Telecom Select Industry Index.

The S&P Telecom Select Industry Index is one of nineteen S&P Select Industry Indices, each designed to measure the performance of a narrow sub-industry or group of sub-industries as defined by the GICS.Companies in the Select Industry Indices are classified based primarily on revenues; however, earnings and market perception are also considered. The Telecom Index is a modified equal weight 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 on par with most peer products in the space, this ETF has annual operating expenses of 0.35%.

It has a 12-month trailing dividend yield of 1.02%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector - about 56.4% of the portfolio. Telecom and Energy round out the top three.

Taking into account individual holdings, Lumentum Holdings Inc (LITE) accounts for about 6.15% of the fund's total assets, followed by Ast Spacemobile Inc (ASTS) and Ondas Holdings Inc (ONDS).

XTL's top 10 holdings account for about 44.99% of its total assets under management.

Performance and Risk

So far this year, XTL return is roughly 3.13%, and is up roughly 49.05% in the last one year (as of 01/12/2026). During this past 52-week period, the fund has traded between $86.93 and $161.68.

The fund has a beta of 1.09 and standard deviation of 23.61% for the trailing three-year period, which makes XTL a medium risk choice in this particular space. With about 42 holdings, it has more concentrated exposure than peers .

Alternatives

State Street SPDR S&P Telecom ETF is a reasonable option for investors seeking to outperform the Communication Services ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

Vanguard Communication Services ETF (VOX) tracks MSCI US Investable Market Telecommunication Services 25/50 Index and the State Street Communication Services Select Sector SPDR ETF (XLC) tracks COMMUNICATION SERVICES SELECT SECTOR IND. Vanguard Communication Services ETF has $6.34 billion in assets, State Street Communication Services Select Sector SPDR ETF has $27.07 billion. VOX has an expense ratio of 0.09% and XLC changes 0.08%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Communication Services ETFs

Bottom Line

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This article originally published on Zacks Investment Research (zacks.com).

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