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VBR vs. XLC: What’s The Difference?

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. VBR is a Vanguard Small Value fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between VBR and XLC? And which fund is better?

The expense ratio of VBR is 0.05 percentage points lower than XLC’s (0.07% vs. 0.12%). VBR also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VBR has provided lower returns than XLC over the past 2 years.

In this article, we’ll compare VBR vs. XLC. We’ll look at annual returns and industry exposure, as well as at their risk metrics and holdings. Moreover, I’ll also discuss VBR’s and XLC’s fund composition, performance, and portfolio growth and examine how these affect their overall returns.

Summary

VBRXLC
NameVanguard Small-Cap Value Index Fund ETF SharesCommunication Services Select Sector SPDR Fund
CategorySmall ValueCommunications
IssuerVanguardSPDR State Street Global Advisors
AUM48.08B14.09B
Avg. Return12.28%29.04%
Div. Yield1.6%0.62%
Expense Ratio0.07%0.12%

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) is a Small Value fund that is issued by Vanguard. It currently has 48.08B total assets under management and has yielded an average annual return of 12.28% over the past 10 years. The fund has a dividend yield of 1.6% with an expense ratio of 0.07%.

The Communication Services Select Sector SPDR Fund (XLC) is a Communications fund that is issued by SPDR State Street Global Advisors. It currently has 14.09B total assets under management and has yielded an average annual return of 29.04% over the past 10 years. The fund has a dividend yield of 0.62% with an expense ratio of 0.12%.

VBR’s dividend yield is 0.98% higher than that of XLC (1.6% vs. 0.62%). Also, VBR yielded on average 16.75% less per year over the past decade (12.28% vs. 29.04%). The expense ratio of VBR is 0.05 percentage points lower than XLC’s (0.07% vs. 0.12%).

Fund Composition

Industry Exposure

VBR vs. XLC - Industry Exposure

VBRXLC
Technology8.39%0.0%
Industrials18.44%0.0%
Energy5.15%0.0%
Communication Services1.77%100.0%
Utilities3.65%0.0%
Healthcare7.16%0.0%
Consumer Defensive4.36%0.0%
Real Estate10.92%0.0%
Financial Services20.04%0.0%
Consumer Cyclical13.82%0.0%
Basic Materials6.31%0.0%

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has the most exposure to the Financial Services sector at 20.04%. This is followed by Industrials and Consumer Cyclical at 18.44% and 13.82% respectively. Utilities (3.65%), Consumer Defensive (4.36%), and Energy (5.15%) only make up 13.16% of the fund’s total assets.

VBR’s mid-section with moderate exposure is comprised of Basic Materials, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.31%, 7.16%, 8.39%, 10.92%, and 13.82%.

The Communication Services Select Sector SPDR Fund (XLC) has the most exposure to the Communication Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

XLC’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

VBR is 20.04% more exposed to the Financial Services sector than XLC (20.04% vs 0.0%). VBR’s exposure to Industrials and Consumer Cyclical stocks is 18.44% higher and 13.82% higher respectively (18.44% vs. 0.0% and 13.82% vs. 0.0%). In total, Utilities, Consumer Defensive, and Energy also make up 13.16% more of the fund’s holdings compared to XLC (13.16% vs. 0.00%).

Holdings

VBR - Holdings

VBR HoldingsWeight
Diamondback Energy Inc0.55%
VICI Properties Inc Ordinary Shares0.54%
IDEX Corp0.54%
Nuance Communications Inc0.5%
Molina Healthcare Inc0.48%
Signature Bank0.46%
Novavax Inc0.44%
Howmet Aerospace Inc0.44%
Apollo Global Management Inc Class A0.42%
Brown & Brown Inc0.41%

VBR’s Top Holdings are Diamondback Energy Inc, VICI Properties Inc Ordinary Shares, IDEX Corp, Nuance Communications Inc, and Molina Healthcare Inc at 0.55%, 0.54%, 0.54%, 0.5%, and 0.48%.

Signature Bank (0.46%), Novavax Inc (0.44%), and Howmet Aerospace Inc (0.44%) have a slightly smaller but still significant weight. Apollo Global Management Inc Class A and Brown & Brown Inc are also represented in the VBR’s holdings at 0.42% and 0.41%.

XLC - Holdings

XLC HoldingsWeight
Facebook Inc A23.75%
Alphabet Inc A11.49%
Alphabet Inc Class C11.16%
Netflix Inc4.78%
Charter Communications Inc A4.65%
Comcast Corp Class A4.44%
T-Mobile US Inc4.41%
The Walt Disney Co4.39%
AT&T Inc4.35%
Verizon Communications Inc4.33%

XLC’s Top Holdings are Facebook Inc A, Alphabet Inc A, Alphabet Inc Class C, Netflix Inc, and Charter Communications Inc A at 23.75%, 11.49%, 11.16%, 4.78%, and 4.65%.

Comcast Corp Class A (4.44%), T-Mobile US Inc (4.41%), and The Walt Disney Co (4.39%) have a slightly smaller but still significant weight. AT&T Inc and Verizon Communications Inc are also represented in the XLC’s holdings at 4.35% and 4.33%.

Risk Analysis

VBRXLC
Mean Return1.080
R-squared82.20
Std. Deviation18.370
Alpha-5.090
Beta1.230
Sharpe Ratio0.670
Treynor Ratio9.150

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has a Alpha of -5.09 with a Mean Return of 1.08 and a Standard Deviation of 18.37. Its Beta is 1.23 while VBR’s Sharpe Ratio is 0.67. Furthermore, the fund has a R-squared of 82.2 and a Treynor Ratio of 9.15.

The Communication Services Select Sector SPDR Fund (XLC) has a Beta of 0 with a Treynor Ratio of 0 and a Alpha of 0. Its Mean Return is 0 while XLC’s Sharpe Ratio is 0. Furthermore, the fund has a Standard Deviation of 0 and a R-squared of 0.

VBR’s Mean Return is 1.08 points higher than that of XLC and its R-squared is 82.20 points higher. With a Standard Deviation of 18.37, VBR is slightly more volatile than XLC. The Alpha and Beta of VBR are 5.09 points lower and 1.23 points higher than XLC’s Alpha and Beta.

Performance

Annual Returns

VBR vs. XLC - Annual Returns

YearVBRXLC
20205.82%26.85%
201922.76%31.22%
2018-12.22%0.0%
201711.79%0.0%
201624.8%0.0%
2015-4.67%0.0%
201410.55%0.0%
201336.57%0.0%
201218.78%0.0%
2011-4.05%0.0%
201024.97%0.0%

VBR had its best year in 2013 with an annual return of 36.57%. VBR’s worst year over the past decade yielded -12.22% and occurred in 2018. In most years the Vanguard Small-Cap Value Index Fund ETF Shares provided moderate returns such as in 2014, 2017, and 2012 where annual returns amounted to 10.55%, 11.79%, and 18.78% respectively.

The year 2019 was the strongest year for XLC, returning 31.22% on an annual basis. The poorest year for XLC in the last ten years was 2018, with a yield of 0.0%. Most years the Communication Services Select Sector SPDR Fund has given investors modest returns, such as in 2014, 2013, and 2012, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

VBR vs. XLC - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VBR$10,000$12,99012.28%
XLC$10,000$16,64529.04%

A $10,000 investment in VBR would have resulted in a final balance of $12,990. This is a profit of $2,990 over 2 years and amounts to a compound annual growth rate (CAGR) of 12.28%.

With a $10,000 investment in XLC, the end total would have been $16,645. This equates to a $6,645 profit over 2 years and a compound annual growth rate (CAGR) of 29.04%.

VBR’s CAGR is 16.75 percentage points lower than that of XLC and as a result, would have yielded $3,655 less on a $10,000 investment. Thus, VBR performed worse than XLC by 16.75% annually.


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