XLV vs. VGK: What’s The Difference?

The Health Care Select Sector SPDR Fund (XLV) and the Vanguard FTSE Europe Index Fund ETF Shares (VGK) are both among the Top 100 ETFs. XLV is a SPDR State Street Global Advisors Health fund and VGK is a Vanguard Europe Stock fund. So, what’s the difference between XLV and VGK? And which fund is better?

The expense ratio of XLV is 0.04 percentage points higher than VGK’s (0.12% vs. 0.08%). XLV also has a higher exposure to the healthcare sector and a lower standard deviation. Overall, XLV has provided higher returns than VGK over the past ten years.

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

Summary

XLV VGK
Name Health Care Select Sector SPDR Fund Vanguard FTSE Europe Index Fund ETF Shares
Category Health Europe Stock
Issuer SPDR State Street Global Advisors Vanguard
AUM 27.88B 25.7B
Avg. Return 15.02% 6.68%
Div. Yield 1.4% 2.52%
Expense Ratio 0.12% 0.08%

The Health Care Select Sector SPDR Fund (XLV) is a Health fund that is issued by SPDR State Street Global Advisors. It currently has 27.88B total assets under management and has yielded an average annual return of 15.02% over the past 10 years. The fund has a dividend yield of 1.4% with an expense ratio of 0.12%.

The Vanguard FTSE Europe Index Fund ETF Shares (VGK) is a Europe Stock fund that is issued by Vanguard. It currently has 25.7B total assets under management and has yielded an average annual return of 6.68% over the past 10 years. The fund has a dividend yield of 2.52% with an expense ratio of 0.08%.

XLV’s dividend yield is 1.12% lower than that of VGK (1.4% vs. 2.52%). Also, XLV yielded on average 8.35% more per year over the past decade (15.02% vs. 6.68%). The expense ratio of XLV is 0.04 percentage points higher than VGK’s (0.12% vs. 0.08%).

Fund Composition

Industry Exposure

XLV vs. VGK - Industry Exposure

XLV VGK
Technology 0.0% 8.3%
Industrials 0.0% 15.58%
Energy 0.0% 4.3%
Communication Services 0.0% 5.09%
Utilities 0.0% 3.89%
Healthcare 100.0% 13.76%
Consumer Defensive 0.0% 11.39%
Real Estate 0.0% 2.57%
Financial Services 0.0% 15.85%
Consumer Cyclical 0.0% 11.6%
Basic Materials 0.0% 7.67%

The Health Care Select Sector SPDR Fund (XLV) has the most exposure to the Healthcare 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.

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

The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has the most exposure to the Financial Services sector at 15.85%. This is followed by Industrials and Healthcare at 15.58% and 13.76% respectively. Utilities (3.89%), Energy (4.3%), and Communication Services (5.09%) only make up 13.28% of the fund’s total assets.

VGK’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.67%, 8.3%, 11.39%, 11.6%, and 13.76%.

XLV is 86.24% more exposed to the Healthcare sector than VGK (100.0% vs 13.76%). XLV’s exposure to Technology and Industrials stocks is 8.30% lower and 15.58% lower respectively (0.0% vs. 8.3% and 0.0% vs. 15.58%). In total, Consumer Cyclical, Financial Services, and Real Estate also make up 30.02% less of the fund’s holdings compared to VGK (0.00% vs. 30.02%).

Holdings

XLV - Holdings

XLV Holdings Weight
Johnson & Johnson 9.19%
UnitedHealth Group Inc 8.01%
Pfizer Inc 4.64%
Abbott Laboratories 4.36%
AbbVie Inc 4.21%
Thermo Fisher Scientific Inc 4.2%
Merck & Co Inc 4.17%
Eli Lilly and Co 3.87%
Danaher Corp 3.61%
Medtronic PLC 3.54%

XLV’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and AbbVie Inc at 9.19%, 8.01%, 4.64%, 4.36%, and 4.21%.

Thermo Fisher Scientific Inc (4.2%), Merck & Co Inc (4.17%), and Eli Lilly and Co (3.87%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the XLV’s holdings at 3.61% and 3.54%.

VGK - Holdings

VGK Holdings Weight
Nestle SA 2.82%
ASML Holding NV 2.2%
Roche Holding AG 2.13%
LVMH Moet Hennessy Louis Vuitton SE 1.58%
Novartis AG 1.55%
AstraZeneca PLC 1.27%
SAP SE 1.25%
Unilever PLC 1.23%
Novo Nordisk A/S B 1.09%
Siemens AG 0.96%

VGK’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.82%, 2.2%, 2.13%, 1.58%, and 1.55%.

AstraZeneca PLC (1.27%), SAP SE (1.25%), and Unilever PLC (1.23%) have a slightly smaller but still significant weight. Novo Nordisk A/S B and Siemens AG are also represented in the VGK’s holdings at 1.09% and 0.96%.

Risk Analysis

XLV VGK
Mean Return 1.27 0.61
R-squared 58.19 92.76
Std. Deviation 12.94 16.65
Alpha 7.75 0.45
Beta 0.7 1.06
Sharpe Ratio 1.13 0.4
Treynor Ratio 21.1 5.12

The Health Care Select Sector SPDR Fund (XLV) has a R-squared of 58.19 with a Standard Deviation of 12.94 and a Mean Return of 1.27. Its Sharpe Ratio is 1.13 while XLV’s Treynor Ratio is 21.1. Furthermore, the fund has a Beta of 0.7 and a Alpha of 7.75.

The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has a R-squared of 92.76 with a Sharpe Ratio of 0.4 and a Alpha of 0.45. Its Mean Return is 0.61 while VGK’s Beta is 1.06. Furthermore, the fund has a Standard Deviation of 16.65 and a Treynor Ratio of 5.12.

XLV’s Mean Return is 0.66 points higher than that of VGK and its R-squared is 34.57 points lower. With a Standard Deviation of 12.94, XLV is slightly less volatile than VGK. The Alpha and Beta of XLV are 7.30 points higher and 0.36 points lower than VGK’s Alpha and Beta.

Performance

Annual Returns

XLV vs. VGK - Annual Returns

Year XLV VGK
2020 13.33% 6.5%
2019 20.63% 24.26%
2018 6.3% -14.79%
2017 21.7% 27.06%
2016 -2.83% -0.59%
2015 6.82% -1.87%
2014 25.17% -6.56%
2013 41.24% 24.93%
2012 17.56% 21.01%
2011 12.44% -11.49%
2010 2.91% 5.01%

XLV had its best year in 2013 with an annual return of 41.24%. XLV’s worst year over the past decade yielded -2.83% and occurred in 2016. In most years the Health Care Select Sector SPDR Fund provided moderate returns such as in 2011, 2020, and 2012 where annual returns amounted to 12.44%, 13.33%, and 17.56% respectively.

The year 2017 was the strongest year for VGK, returning 27.06% on an annual basis. The poorest year for VGK in the last ten years was 2018, with a yield of -14.79%. Most years the Vanguard FTSE Europe Index Fund ETF Shares has given investors modest returns, such as in 2016, 2010, and 2020, when gains were -0.59%, 5.01%, and 6.5% respectively.

Portfolio Growth

XLV vs. VGK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLV $10,000 $44,147 15.02%
VGK $10,000 $18,350 6.68%

A $10,000 investment in XLV would have resulted in a final balance of $44,147. This is a profit of $34,147 over 11 years and amounts to a compound annual growth rate (CAGR) of 15.02%.

With a $10,000 investment in VGK, the end total would have been $18,350. This equates to a $8,350 profit over 11 years and a compound annual growth rate (CAGR) of 6.68%.

XLV’s CAGR is 8.35 percentage points higher than that of VGK and as a result, would have yielded $25,797 more on a $10,000 investment. Thus, XLV outperformed VGK by 8.35% annually.


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