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XLK vs. VLUE: What’s The Difference?

The Technology Select Sector SPDR Fund (XLK) and the iShares MSCI USA Value Factor ETF (VLUE) are both among the Top 100 ETFs. XLK is a SPDR State Street Global Advisors Technology fund and VLUE is a iShares Large Value fund. So, what’s the difference between XLK and VLUE? And which fund is better?

The expense ratio of XLK is 0.03 percentage points lower than VLUE’s (0.12% vs. 0.15%). XLK also has a higher exposure to the technology sector and a higher standard deviation. Overall, XLK has provided higher returns than VLUE over the past ten years.

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

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Summary

XLKVLUE
NameTechnology Select Sector SPDR FundiShares MSCI USA Value Factor ETF
CategoryTechnologyLarge Value
IssuerSPDR State Street Global AdvisorsiShares
AUM42.3B15.95B
Avg. Return20.02%8.91%
Div. Yield0.73%1.89%
Expense Ratio0.12%0.15%

The Technology Select Sector SPDR Fund (XLK) is a Technology fund that is issued by SPDR State Street Global Advisors. It currently has 42.3B total assets under management and has yielded an average annual return of 20.02% over the past 10 years. The fund has a dividend yield of 0.73% with an expense ratio of 0.12%.

The iShares MSCI USA Value Factor ETF (VLUE) is a Large Value fund that is issued by iShares. It currently has 15.95B total assets under management and has yielded an average annual return of 8.91% over the past 10 years. The fund has a dividend yield of 1.89% with an expense ratio of 0.15%.

XLK’s dividend yield is 1.16% lower than that of VLUE (0.73% vs. 1.89%). Also, XLK yielded on average 11.11% more per year over the past decade (20.02% vs. 8.91%). The expense ratio of XLK is 0.03 percentage points lower than VLUE’s (0.12% vs. 0.15%).

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Fund Composition

Industry Exposure

XLK vs. VLUE - Industry Exposure

XLKVLUE
Technology87.54%26.89%
Industrials1.75%9.14%
Energy0.0%2.42%
Communication Services0.0%10.39%
Utilities0.0%2.68%
Healthcare0.0%14.31%
Consumer Defensive0.0%7.22%
Real Estate0.0%3.19%
Financial Services10.71%10.96%
Consumer Cyclical0.0%10.66%
Basic Materials0.0%2.14%

The Technology Select Sector SPDR Fund (XLK) has the most exposure to the Technology sector at 87.54%. This is followed by Financial Services and Industrials at 10.71% and 1.75% respectively. Consumer Cyclical (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

XLK’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 1.75%.

The iShares MSCI USA Value Factor ETF (VLUE) has the most exposure to the Technology sector at 26.89%. This is followed by Healthcare and Financial Services at 14.31% and 10.96% respectively. Energy (2.42%), Utilities (2.68%), and Real Estate (3.19%) only make up 8.29% of the fund’s total assets.

VLUE’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Financial Services stocks at 7.22%, 9.14%, 10.39%, 10.66%, and 10.96%.

XLK is 60.65% more exposed to the Technology sector than VLUE (87.54% vs 26.89%). XLK’s exposure to Financial Services and Industrials stocks is 0.25% lower and 7.39% lower respectively (10.71% vs. 10.96% and 1.75% vs. 9.14%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 21.07% less of the fund’s holdings compared to VLUE (0.00% vs. 21.07%).

Holdings

XLK - Holdings

XLK HoldingsWeight
Apple Inc21.45%
Microsoft Corp20.37%
NVIDIA Corp4.98%
Visa Inc Class A3.95%
PayPal Holdings Inc3.42%
Mastercard Inc A3.19%
Adobe Inc2.8%
Salesforce.com Inc2.26%
Intel Corp2.26%
Cisco Systems Inc2.23%

XLK’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 21.45%, 20.37%, 4.98%, 3.95%, and 3.42%.

Mastercard Inc A (3.19%), Adobe Inc (2.8%), and Salesforce.com Inc (2.26%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the XLK’s holdings at 2.26% and 2.23%.

VLUE - Holdings

VLUE HoldingsWeight
AT&T Inc7.13%
Intel Corp6.14%
General Motors Co3.19%
Micron Technology Inc3.14%
Cisco Systems Inc3.05%
International Business Machines Corp2.76%
Target Corp2.38%
Citigroup Inc2.32%
Ford Motor Co2.23%
Pfizer Inc2.17%

VLUE’s Top Holdings are AT&T Inc, Intel Corp, General Motors Co, Micron Technology Inc, and Cisco Systems Inc at 7.13%, 6.14%, 3.19%, 3.14%, and 3.05%.

International Business Machines Corp (2.76%), Target Corp (2.38%), and Citigroup Inc (2.32%) have a slightly smaller but still significant weight. Ford Motor Co and Pfizer Inc are also represented in the VLUE’s holdings at 2.23% and 2.17%.

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Risk Analysis

XLKVLUE
Mean Return1.70
R-squared73.560
Std. Deviation15.580
Alpha10.430
Beta0.950
Sharpe Ratio1.270
Treynor Ratio21.440

The Technology Select Sector SPDR Fund (XLK) has a Beta of 0.95 with a Alpha of 10.43 and a Sharpe Ratio of 1.27. Its Mean Return is 1.7 while XLK’s Standard Deviation is 15.58. Furthermore, the fund has a Treynor Ratio of 21.44 and a R-squared of 73.56.

The iShares MSCI USA Value Factor ETF (VLUE) has a Alpha of 0 with a Standard Deviation of 0 and a Sharpe Ratio of 0. Its Mean Return is 0 while VLUE’s Beta is 0. Furthermore, the fund has a Treynor Ratio of 0 and a R-squared of 0.

XLK’s Mean Return is 1.70 points higher than that of VLUE and its R-squared is 73.56 points higher. With a Standard Deviation of 15.58, XLK is slightly more volatile than VLUE. The Alpha and Beta of XLK are 10.43 points higher and 0.95 points higher than VLUE’s Alpha and Beta.

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Performance

Annual Returns

XLK vs. VLUE - Annual Returns

YearXLKVLUE
202043.67%-0.32%
201949.97%27.47%
2018-1.56%-11.18%
201734.27%21.97%
201614.81%15.68%
20155.62%-3.54%
201417.75%12.29%
201325.98%0.0%
201215.47%0.0%
20112.69%0.0%
201011.6%0.0%

XLK had its best year in 2019 with an annual return of 49.97%. XLK’s worst year over the past decade yielded -1.56% and occurred in 2018. In most years the Technology Select Sector SPDR Fund provided moderate returns such as in 2016, 2012, and 2014 where annual returns amounted to 14.81%, 15.47%, and 17.75% respectively.

The year 2019 was the strongest year for VLUE, returning 27.47% on an annual basis. The poorest year for VLUE in the last ten years was 2018, with a yield of -11.18%. Most years the iShares MSCI USA Value Factor ETF has given investors modest returns, such as in 2012, 2011, and 2010, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

XLK vs. VLUE - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLK$10,000$40,66320.02%
VLUE$10,000$17,2478.91%

A $10,000 investment in XLK would have resulted in a final balance of $40,663. This is a profit of $30,663 over 7 years and amounts to a compound annual growth rate (CAGR) of 20.02%.

With a $10,000 investment in VLUE, the end total would have been $17,247. This equates to a $7,247 profit over 7 years and a compound annual growth rate (CAGR) of 8.91%.

XLK’s CAGR is 11.11 percentage points higher than that of VLUE and as a result, would have yielded $23,416 more on a $10,000 investment. Thus, XLK outperformed VLUE by 11.11% annually.


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