Should You Invest in the Materials Select Sector SPDR ETF?
Written by Emily J. Thompson, Senior Investment Analyst
Updated: May 30 2024
0mins
Source: Business Insider
Materials Select Sector SPDR ETF (XLB):
- Passively managed ETF providing exposure to the Materials - Broad segment of the equity market.
- Sponsored by State Street Global Advisors with over $5.63 billion in assets.
- Seeks to match the performance of the Materials Select Sector Index with an expense ratio of 0.09%.
- Heaviest allocation in the Materials sector, top holdings include Linde Plc, Sherwin Williams Co, and Freeport Mcmoran Inc.
- Year-to-date performance up 6.77%, with a beta of 1.10 and standard deviation of 19.28%.
Alternatives:
- Other ETF options in the materials segment include SPDR S&P Global Natural Resources ETF (GNR) and FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR).
- GNR tracks S&P Global Natural Resources Index with $3.43 billion in assets and an expense ratio of 0.40%.
- GUNR tracks Morningstar Global Upstream Natural Resources Index with $6.45 billion in assets and an expense ratio of 0.46%.
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Analyst Views on LIN
Wall Street analysts forecast LIN stock price to fall
17 Analyst Rating
15 Buy
2 Hold
0 Sell
Strong Buy
Current: 515.440
Low
455.00
Averages
499.07
High
540.00
Current: 515.440
Low
455.00
Averages
499.07
High
540.00
About LIN
Linde plc is a United Kingdom-based global industrial gases and engineering company. The Company's segments include Americas, EMEA, APAC and Engineering. Its primary products in its industrial gases business consists of atmospheric gases, such as oxygen, nitrogen, argon, and rare gases and process gases, including hydrogen, helium, carbon dioxide, carbon monoxide, electronic gases, and acetylene, among others. The Company also designs and builds equipment that produces industrial gases and offers customers a range of gas production and processing services, such as olefin plants, natural gas plants, air separation plants, hydrogen and synthesis gas plants and other types of plants. It serves a diverse group of industries including healthcare, chemicals and energy, manufacturing, metals and mining, food and beverage, and electronics. Its Engineering business designs and manufactures equipment for air separation and other industrial gas applications specifically for end customers.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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See More
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- Airline Stock Surge: The JETS ETF surged nearly 6% this week as crude oil prices fell from $115 to $95, with each $10 drop directly enhancing airline operating margins, indicating a strong recovery potential for the airline industry amid lower costs.
- Materials Sector Trend Reversal: The Materials Select Sector SPDR (XLB) rose 3% this week, breaking a downtrend, with companies like Linde and Nucor showing strong performance, the latter's stock up 64% year-to-date, signaling a recovery in the materials sector.
- Infrastructure Investment Growth: The Global X U.S. Infrastructure Development ETF (PAVE) is up 21% year-to-date, with Quanta Services exceeding Q1 EPS expectations and a record backlog of $48.5 billion, reflecting robust demand in the infrastructure sector.
- Improved Rate Environment: The 10-year Treasury yield has retreated from a high of 4.67% to 4.45%, providing a more favorable financing environment for capital-intensive companies, further supporting the upward trends in airline, materials, and infrastructure stocks.
See More
Market Update: SpaceX IPO and Oil Price Fluctuations
- Market Sentiment Fluctuations: Stocks were mixed on Friday as investors weighed the possibility of a peace deal between the U.S. and Iran against the backdrop of the upcoming SpaceX IPO, with Trump warning Iran to 'get their act together', yet the market remains optimistic about a potential agreement.
- SpaceX IPO Focus: Priced at $135 per share, SpaceX's IPO is expected to open around $165, with Jim Cramer noting strong demand and suggesting that the market may absorb this massive deal better than anticipated, advising investors to wait for a trading history before buying.
- Intel Stock Surge: Intel shares rose 5% on Friday, adding to a 9% gain on Thursday following a double upgrade from Bank of America analysts, with Jim calling Intel 'the greatest story right now' in semiconductors and projecting a 63% upside potential.
- Quick Stock Recap: Other stocks mentioned at the end of the video included Williams Sonoma, AMD, Arm, and Lennar, with Jim Cramer's charitable trust holding INTC, LIN, and NVDA, providing trade alerts to subscribers before executing trades.
See More
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- Investment Opportunity in Space Economy: Morningstar analysts highlight Linde as a primary supplier for SpaceX, supporting 70% of its launches, suggesting it as a low-risk investment option poised to benefit from the SpaceX IPO.
- Market Potential Assessment: While space-related business currently accounts for only 1% of Linde's revenue, Morningstar forecasts this could rise to 8% by 2040, indicating significant growth potential, particularly with SpaceX's increasing launch cadence.
- Strong Financial Performance: Linde's market cap has surged from $91 billion post-merger to $235 billion, with projected revenues reaching $34 billion by 2025 and operating profits increasing, underscoring the company's growing importance in the space economy.
- Investor Sentiment Analysis: On Stocktwits, Linde's sentiment is rated neutral despite a 9% stock price increase over the past year, reflecting a cautiously optimistic market outlook on its future growth prospects.
See More
Investors Shift Towards Defensive Market Sectors
- Risk Appetite Decline: On Wednesday, the Dow Jones Industrial Average fell by 953 points, or 1.87%, while the S&P 500 and Nasdaq Composite declined by 1.62% and 1.98%, respectively, indicating a significant shift in investor sentiment away from riskier assets.
- Preference for Defensive Stocks: Cramer noted that the S&P 500's list of stocks hitting 52-week highs was dominated by real estate investment trusts, insurers, and consumer staples, suggesting that investors are prioritizing stable cash flows and dividend income in their portfolios.
- Reduced Focus on Tech Stocks: Compared to previous trends, relatively few technology companies made it to the new high list, with Applied Materials and KLA Corp being notable exceptions benefiting from strong demand for memory chips, highlighting a stark departure from the previous market leadership.
- Investors Seeking Safety: Cramer emphasized that investors are increasingly favoring businesses that can withstand uncertain economic conditions, reflecting a growing fatigue with data centers and fast-growing companies, and a strong demand for safety and yield.
See More
Market Update: Rising Oil Prices and IPO Impacts
- Oil Price Pressure: Rising oil prices due to renewed tensions in Iran have led the S&P 500 and Nasdaq to face back-to-back losses, indicating market sensitivity to increasing energy costs that could undermine investor confidence.
- IPO Market Dynamics: With major IPOs from SpaceX, Anthropic, and OpenAI on the horizon, Jim Cramer expresses concern that new stock offerings may dilute market capital, prompting investors to trim positions and increase cash holdings, which now account for 12.4% of the portfolio.
- Linde's Beneficial Outlook: Analysts project that Linde will benefit from SpaceX's IPO, with expected launch revenues rising from $4 million last year to $6 million by 2028, highlighting the growth potential in the space sector for Linde.
- Starbucks Strategic Review: Starbucks is weighing strategic options for its Japanese business, potentially valuing it at $2.5 billion, aiming to optimize resource allocation and focus on the U.S. market turnaround, reflecting the company's adaptive strategy across different markets.
See More
Linde Positioned to Benefit from Space Transportation Boom
- Market Opportunity: According to Rothschild & Co. Redburn, the burgeoning space transportation industry presents a unique opportunity for Linde, as analyst Tony Jones reiterated a buy rating and raised the price target from $550 to $560, implying a potential 9% increase from Tuesday's close of $515.59.
- Historical Collaboration: Linde has supplied fuel to NASA for nearly 60 years, and with increasing capital expenditures at SpaceX's Starbase, the company's commercial relationships and distribution platform are rapidly advancing, further solidifying its position in the space transportation market.
- Revenue Growth Potential: Jones predicts that with the development of SpaceX's Starship, Linde's revenue per launch could approach $6 million by 2028, up from $4 million in 2025, indicating significant growth potential alongside an exponential increase in launch cadence.
- Strong Business Foundation: The analyst praised Linde for its “rock-solid business and top-quartile management,” suggesting that an increase in contracts and a revised backlog could provide clear catalysts for the company's valuation and earnings.
See More
