XLY vs. IWS: What’s The Difference?

The Consumer Discretionary Select Sector SPDR Fund (XLY) and the iShares Russell Mid-Cap Value ETF (IWS) are both among the Top 100 ETFs. XLY is a SPDR State Street Global Advisors Consumer Cyclical fund and IWS is a iShares Mid-Cap Value fund. So, what’s the difference between XLY and IWS? And which fund is better?

The expense ratio of XLY is 0.11 percentage points lower than IWS’s (0.12% vs. 0.23%). XLY also has a higher exposure to the consumer cyclical sector and a lower standard deviation. Overall, XLY has provided higher returns than IWS over the past 11 years.

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

Summary

XLY IWS
Name Consumer Discretionary Select Sector SPDR Fund iShares Russell Mid-Cap Value ETF
Category Consumer Cyclical Mid-Cap Value
Issuer SPDR State Street Global Advisors iShares
AUM 20.21B 14.24B
Avg. Return 18.86% 12.35%
Div. Yield 0.63% 1.34%
Expense Ratio 0.12% 0.23%

The Consumer Discretionary Select Sector SPDR Fund (XLY) is a Consumer Cyclical fund that is issued by SPDR State Street Global Advisors. It currently has 20.21B total assets under management and has yielded an average annual return of 18.86% over the past 10 years. The fund has a dividend yield of 0.63% with an expense ratio of 0.12%.

The iShares Russell Mid-Cap Value ETF (IWS) is a Mid-Cap Value fund that is issued by iShares. It currently has 14.24B total assets under management and has yielded an average annual return of 12.35% over the past 10 years. The fund has a dividend yield of 1.34% with an expense ratio of 0.23%.

XLY’s dividend yield is 0.71% lower than that of IWS (0.63% vs. 1.34%). Also, XLY yielded on average 6.52% more per year over the past decade (18.86% vs. 12.35%). The expense ratio of XLY is 0.11 percentage points lower than IWS’s (0.12% vs. 0.23%).

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Fund Composition

Industry Exposure

XLY vs. IWS - Industry Exposure

XLY IWS
Technology 0.57% 11.39%
Industrials 0.0% 14.6%
Energy 0.0% 4.71%
Communication Services 0.0% 4.08%
Utilities 0.0% 6.97%
Healthcare 0.0% 8.56%
Consumer Defensive 5.34% 4.76%
Real Estate 0.0% 11.71%
Financial Services 0.0% 15.75%
Consumer Cyclical 94.1% 12.07%
Basic Materials 0.0% 5.4%

The Consumer Discretionary Select Sector SPDR Fund (XLY) has the most exposure to the Consumer Cyclical sector at 94.1%. This is followed by Consumer Defensive and Technology at 5.34% and 0.57% respectively. Financial Services (0.0%), Real Estate (0.0%), and Healthcare (0.0%) only make up 0.00% of the fund’s total assets.

XLY’s mid-section with moderate exposure is comprised of Utilities, Communication Services, Energy, Industrials, and Technology stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.57%.

The iShares Russell Mid-Cap Value ETF (IWS) has the most exposure to the Financial Services sector at 15.75%. This is followed by Industrials and Consumer Cyclical at 14.6% and 12.07% respectively. Energy (4.71%), Consumer Defensive (4.76%), and Basic Materials (5.4%) only make up 14.87% of the fund’s total assets.

IWS’s mid-section with moderate exposure is comprised of Utilities, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.97%, 8.56%, 11.39%, 11.71%, and 12.07%.

XLY is 82.03% more exposed to the Consumer Cyclical sector than IWS (94.1% vs 12.07%). XLY’s exposure to Consumer Defensive and Technology stocks is 0.58% higher and 10.82% lower respectively (5.34% vs. 4.76% and 0.57% vs. 11.39%). In total, Financial Services, Real Estate, and Healthcare also make up 36.02% less of the fund’s holdings compared to IWS (0.00% vs. 36.02%).

Holdings

XLY - Holdings

XLY Holdings Weight
Amazon.com Inc 22.9%
Tesla Inc 13.5%
The Home Depot Inc 8.74%
McDonald’s Corp 4.5%
Nike Inc B 4.45%
Lowe’s Companies Inc 3.58%
Starbucks Corp 3.44%
Target Corp 3.12%
Booking Holdings Inc 2.35%
TJX Companies Inc 2.12%

XLY’s Top Holdings are Amazon.com Inc, Tesla Inc, The Home Depot Inc, McDonald’s Corp, and Nike Inc B at 22.9%, 13.5%, 8.74%, 4.5%, and 4.45%.

Lowe’s Companies Inc (3.58%), Starbucks Corp (3.44%), and Target Corp (3.12%) have a slightly smaller but still significant weight. Booking Holdings Inc and TJX Companies Inc are also represented in the XLY’s holdings at 2.35% and 2.12%.

IWS - Holdings

IWS Holdings Weight
Twitter Inc 0.69%
Marvell Technology Inc 0.69%
IHS Markit Ltd 0.62%
Prudential Financial Inc 0.56%
Otis Worldwide Corp Ordinary Shares 0.54%
International Flavors & Fragrances Inc 0.53%
Xcel Energy Inc 0.52%
Motorola Solutions Inc 0.52%
Aptiv PLC 0.52%
Aflac Inc 0.52%

IWS’s Top Holdings are Twitter Inc, Marvell Technology Inc, IHS Markit Ltd, Prudential Financial Inc, and Otis Worldwide Corp Ordinary Shares at 0.69%, 0.69%, 0.62%, 0.56%, and 0.54%.

International Flavors & Fragrances Inc (0.53%), Xcel Energy Inc (0.52%), and Motorola Solutions Inc (0.52%) have a slightly smaller but still significant weight. Aptiv PLC and Aflac Inc are also represented in the IWS’s holdings at 0.52% and 0.52%.

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Risk Analysis

XLY IWS
Mean Return 1.47 1.06
R-squared 80.84 87.04
Std. Deviation 15.97 16.03
Alpha 6.96 -4.11
Beta 1.02 1.1
Sharpe Ratio 1.06 0.75
Treynor Ratio 16.69 10.3

The Consumer Discretionary Select Sector SPDR Fund (XLY) has a Alpha of 6.96 with a R-squared of 80.84 and a Mean Return of 1.47. Its Beta is 1.02 while XLY’s Treynor Ratio is 16.69. Furthermore, the fund has a Sharpe Ratio of 1.06 and a Standard Deviation of 15.97.

The iShares Russell Mid-Cap Value ETF (IWS) has a Beta of 1.1 with a Treynor Ratio of 10.3 and a Alpha of -4.11. Its Sharpe Ratio is 0.75 while IWS’s Standard Deviation is 16.03. Furthermore, the fund has a R-squared of 87.04 and a Mean Return of 1.06.

XLY’s Mean Return is 0.41 points higher than that of IWS and its R-squared is 6.20 points lower. With a Standard Deviation of 15.97, XLY is slightly less volatile than IWS. The Alpha and Beta of XLY are 11.07 points higher and 0.08 points lower than IWS’s Alpha and Beta.

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Performance

Annual Returns

XLY vs. IWS - Annual Returns

Year XLY IWS
2020 29.66% 4.76%
2019 28.43% 26.78%
2018 1.66% -12.36%
2017 22.77% 13.1%
2016 5.87% 19.69%
2015 9.93% -4.93%
2014 9.49% 14.49%
2013 42.74% 33.11%
2012 23.6% 18.27%
2011 5.98% -1.55%
2010 27.36% 24.46%

XLY had its best year in 2013 with an annual return of 42.74%. XLY’s worst year over the past decade yielded 1.66% and occurred in 2018. In most years the Consumer Discretionary Select Sector SPDR Fund provided moderate returns such as in 2015, 2017, and 2012 where annual returns amounted to 9.93%, 22.77%, and 23.6% respectively.

The year 2013 was the strongest year for IWS, returning 33.11% on an annual basis. The poorest year for IWS in the last ten years was 2018, with a yield of -12.36%. Most years the iShares Russell Mid-Cap Value ETF has given investors modest returns, such as in 2017, 2014, and 2012, when gains were 13.1%, 14.49%, and 18.27% respectively.

Portfolio Growth

XLY vs. IWS - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLY $10,000 $63,066 18.86%
IWS $10,000 $33,083 12.35%

A $10,000 investment in XLY would have resulted in a final balance of $63,066. This is a profit of $53,066 over 11 years and amounts to a compound annual growth rate (CAGR) of 18.86%.

With a $10,000 investment in IWS, the end total would have been $33,083. This equates to a $23,083 profit over 11 years and a compound annual growth rate (CAGR) of 12.35%.

XLY’s CAGR is 6.52 percentage points higher than that of IWS and as a result, would have yielded $29,983 more on a $10,000 investment. Thus, XLY outperformed IWS by 6.52% annually.


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