In the six years ending 2013, XLB only outperformed the S&P 500 twice – in 2009 and 2010. At the fundamental level, materials stocks are a tad pricy compared to the S&P 500. On a relative basis, the materials sector is trading above its long-term price-to-earnings, price-to-book and price-to-operating cash flow ratios.
Dow component DuPont (NYSE: DD), Monsanto (NYSE: MON) and Dow Chemical (NYSE: DOW) combine for about 30% of XLB’s weight. That is more than the ETF’s next five holdings combined, highlighting the importance of those three stocks to XLB’s fortunes.
Materials Select Sector SPDR
ETF Trends editorial team contributed to this post.