Best Industrial ETFs for Q1 2022

XTN, AIRR, and FIW are the best industrial ETFs for Q1 2022

The industrial sector is comprised of companies that produce supplies and equipment used in construction and manufacturing, as well as businesses providing related services. The sector is closely linked with the broader economy, and industrial stocks tend to drop dramatically during periods of economic turmoil. Still, there are a variety of industrial subsectors that may perform differently based in their specific characteristics. Some of the best-known companies in the sector include Honeywell International Inc. (HON), Lockheed Martin Corp. (LMT), and 3M Co. (MMM). The industrial sector also includes air transportation services companies. Investors looking to gain exposure to the industrial sector may consider exchange-traded funds (ETFs) which provide access to broader baskets of stocks while reducing the risks typically involved with investing in individual names.

Key Takeaways

  • The industrial sector underperformed the broader market over the past year.
  • The industrial ETFs with the best 1-year trailing total return are XTN, AIRR, and FIW.
  • The top holdings of these ETFs are Uber Technologies Inc., Encore Wire Corp., and Essential Utilities Inc., respectively.

There are 26 industrial ETFs that trade in the U.S., excluding leveraged or inverse funds as well as those with under $50 million in assets under management (AUM). The industrial sector as represented by the benchmark S&P 500 Industrials Sector Index has underperformed the broader market in the past year. The index has provided 1-year trailing total returns of 21.1% compared with 28.7% for the S&P 500, as of Dec. 31, 2021. The best performing industrial ETF, based on performance over the past year, is the SPDR S&P Transportation ETF (XTN). Below, we’ll look at the three best industrial ETFs as measured by 1-year trailing total returns. All figures in the tables below are as of Dec. 31, 2021.

SPDR S&P Transportation ETF (XTN)

  • 1-Year Trailing Total Returns: 33.7%
  • Expense Ratio: 0.35%
  • Annual Dividend Yield: 1.08%
  • 3-Month Average Daily Volume: 148,140
  • Assets Under Management: $885.2 million
  • Inception Date: Jan. 26, 2011
  • Issuing Company: State Street

XTN is a multi-cap fund that tracks the S&P Transportation Select Industry Index. The index comprises companies operating in transport sub-industries, including airlines, air freight and logistics, highways, rail tracks and railroads, and marine and marine port services. Trucking accounts for the largest sub-industry allocation, representing nearly 36% of the fund's invested assets, and is followed by airlines and air freight and logistics stocks. The fund's top holdings include Uber Technologies Inc. (UBER), class A shares of Lyft Inc. (LYFT), and Joby Aviation Inc. (JOBY). The first two of these companies provide ride sharing platforms and related services, while the third is an aerospace company that develops electric aircraft.

First Trust RBA American Industrial Renaissance ETF (AIRR)

  • 1-Year Trailing Total Returns: 33.0%
  • Expense Ratio: 0.70%
  • Annual Dividend Yield: 0.05%
  • 3-Month Average Daily Volume: 31,414
  • Assets Under Management: $259.7 million
  • Inception Date: March 10, 2014
  • Issuing Company: First Trust

AIRR is a multi-cap fund that utilizes a blended mix of value and growth stocks in its portfolio. The fund targets the Richard Bernstein Advisors American Industrial Renaissance Index, an index of small- and mid-cap companies representing the industrial and community banking sectors. For this reason, AIRR does not provide pure-play exposure to industrial stocks and includes bank stocks as a small share of its portfolio. The top 10 positions in AIRR's portfolio account for roughly one-third of total invested assets. The top holdings include Encore Wire Corp. (WIRE), a maker of copper and aluminum wire products; APi Group Corp. (APG), a provider of safety, specialty, and industrial services; and Comfort Systems USA, Inc. (FIX), a mechanical and electrical service contracting provider.

First Trust Water ETF (FIW)

  • 1-Year Trailing Total Returns: 32.0%
  • Expense Ratio: 0.54%
  • Annual Dividend Yield: 0.39%
  • 3-Month Average Daily Volume: 81,472
  • Assets Under Management: $1.6 billion
  • Inception Date: May 8, 2007
  • Issuing Company: First Trust

FIW is a multi-cap ETF that invests in a blend of value and growth stocks. It tracks the ISE Clean Edge Water Index. The index is composed of exchange-listed companies deriving a substantial portion of their revenue from the potable and wastewater industry. They are selected according to market capitalization, liquidity, and other requirements. Over 90% of the portfolio represents three sectors: industrials, utilities, and healthcare. FIW’s top three holdings are Essential Utilities Inc. (WTRG), a utility company providing drinking water and wastewater treatment infrastructure and services; IDEX Corp. (IEX), a fluidics systems and specialty engineered products company; and Advanced Drainage Systems Inc. (WMS), a maker of pipes, tanks, and other drainage and water industry equipment.

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