Trading volume has been rather heavy in recent sessions on substantial selling pressure in Materials sector based ETFs, and we have also seen some put buying in the largest product in the segment, XLB (SPDR Materials Select Sector, Expense Ratio 0.16%).
The fund, which has about $4.69 billion in assets under management, has seen >$270 million flow out via redemptions lately, while related ETF FXZ (First Trust Materials AlphaDEX, Expense Ratio 0.70%) has lost nearly $200 million in similar activity. FXZ happens to be the third largest fund in the “Materials” sector space, with around $848 million in AUM.
The selling pressure lately appears to be a larger model change in a sector rotation model, and the December 45 puts in XLB traded in decent size as well yesterday, but are notably out of the money. XLB is having trouble with its 200 day MA in recent sessions, but the fund is well off the $44 handle it briefly traded at in the middle of this month.
Top holdings in XLB are as follows, DD (>10.8%), MON (>9.7%), DOW (>9.7%), LYB (>7.6%), and PX (>6.2%). FXZ looks much different as one might expect, given it employs the AlphaDEX methodology, which in essence is a fundamental and/or quantitative screening process on the sector itself in order to rank the names, and then equal weight the “top names” in the resulting screen.
Top holdings here are unquestionably lesser known Materials companies, not at all like the familiar DuPont, Monsanto, and Dow Chemical for example of XLB, but are TimkenSteel Corp. (TMST, >3.8%), CF Industries Holdings Inc. (CF, >3.7%), and Westlake Chemical Corp. (WLK, >3.3%). VAW (Vanguard Materials, Expense Ratio 0.14%) and IYM (iShares U.S. Basic Materials Sector, Expense Ratio 0.44%) are also larger funds in this
sector space, as VAW has amassed more than $1.4 billion in assets at current levels, and IYM has >$771 million at the moment.