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Top 10 Industrial Sector ETFs

Our goal in this profile is to help investors wade through the many competing ETF offerings available. Using our long experience as an ETF publication, and nearly 40 years in the investment business, we can help select those ETFs that matter and may or may not be repetitive. The result is a more manageable list of issues from which to view and make selections.

There is currently an expanding list of 20 ETFs oriented to the industrial sector with more on the way. The following analysis features a fair representation of ETFs available. We believe from these investors may choose an appropriate ETF to satisfy the best index-based offerings individuals and financial advisors may utilize.

We're not ranking these ETFs favoring one over another so don't let the listing order mislead you. Although we may use some of these in ETF Digest portfolios it's not our intention to recommend one over another.

ETFs are based on indexes tied to well-known index providers including Russell, S&P, Barclays, MSCI, Dow Jones and so forth. Also included are some so-called "enhanced" indexes that attempt to achieve better performance through more active management of the index.

Where competitive issues exist and/or repetitive issues available at a fee cost saving we mention those as other choices. New issues are coming to market consistently (especially globally) and sometimes these issues will need to become more seasoned before they may be included at least in our listings.

We feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short. Premium members to the ETF Digest receive added signals when markets become extended such as DeMark triggers to exit overbought/oversold conditions.

For traders and investors wishing to hedge, leveraged and inverse issues are available to utilize from ProShares and Direxion and where available these are noted.

XLI (SPDR Industrials ETF) follows the Industrial Select Sector Index that contains constituents from a wide variety of U.S. manufacturers. The fund was launched in December 1998. The expense ratio is .20%. AUM (Assets under Management) equal $3.4 billion and average daily trading volume is over 29M shares. As of early November 2011 the annual dividend was $.69 making the current yield roughly 2.05% and YTD return -5.70%. 

An alternative issue FIL (Focus Morningstar Industrials ETF) was recently launched by FocusShares and Scottrade. It is too new to rate for now but clearly the fees are low and commission free trading is available for Scottrade customers.    

Both ProShares and Direxion Shares maintain leveraged long and short ETFs for hedging or speculation needs.

Data as of November 2011

XLI Top Ten Holdings & Weightings

  1. General Electric Co (GE): 10.73%
  2. United Technologies Corp (UTX): 5.96%
  3. United Parcel Service Inc (UPS) (UPS): 5.66%
  4. 3M Co (MMM): 4.69%
  5. Caterpillar Inc (CAT): 4.57%
  6. The Boeing Co (BA): 4.20%
  7. Union Pacific Corp (UNP): 3.89%
  8. Honeywell International, Inc. (HON): 3.25%
  9. Emerson Electric Co. (EMR): 2.92%
  10. Deere & Co (DE): 2.68

VIS (Vanguard Industrials ETF) follows the MSCI US Investable Market Industrials 25/50 Index which covers a similarly wide spectrum of constituents as XLI. The fund was launched in September 2004. The expense ratio is .24%. AUM equal $450 million while average daily trading volume is low at 64K shares. The lighter volume indicates Vanguard's emphasis on buy and hold especially with financial advisors. As of early November 2011 the annual dividend is $.85 making the current yield around 2.16% and a YTD return of over -7.33%.

Data as of November 2011

VIS Top Ten Holdings & Weightings

  1. General Electric Co (GE): 11.56%
  2. United Technologies Corp (UTX): 4.47%
  3. Caterpillar Inc (CAT): 3.93%
  4. 3M Co (MMM): 3.70%
  5. United Parcel Service, Inc. (UPS): 3.09%
  6. The Boeing Co (BA): 2.98%
  7. Union Pacific Corp (UNP): 2.96%
  8. Honeywell International, Inc. (HON): 2.56%
  9. Emerson Electric Co. (EMR): 2.45%
  10. Deere & Co (DE): 2.00%

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