ETF - AltaVista Research SPDR Analyzer 100110.pdf · 10/1/2010 · The AltaVista Long Term Annual Return (ALTAR™) forecast is AltaVista’s proprietary measure of an ETF’slong

ETFAnalyzerOctober 2010

Select Sector SPDR Edition

Evaluate Sector SPDRs based on investment merit using fundamental data and analysis

Compare Sector SPDRs with ease on a variety of forward-looking valuation metrics

Succinct reports in three easy-to-read sections: Investment Summary, Fundamentals, and Composition

ALPS Distributor Inc., is the distributor for the Select Sector SPDR Trust. Important additional disclosure information including risks related to investing in Select Sector SPDR funds can be found on page 2.

© 2010 AltaVista Research, LLC. All rights reserved.

Disclosures

ALPS Distributor, Inc. is the distributor of the Select Sector SPDR Trust(C) 2010 AltaVista Research, LLC. All Rights Reserved.

Limitations on Usage This report is provided by AltaVista Research, LLC (“AltaVista”) for informational purposes only, and is for distribution only as permittedby applicable law. Any opinions expressed herein are solely those of AltaVista and make no allowances for any specific investmentobjectives. As such, they do not constitute a recommendation with respect to the investment merits of any security mentioned herein.Nothing in this report should be construed as an offer or solicitation of an offer to purchase any securities. Prices and valuation datachange with market conditions and investors should be aware that this material could be substantially out of date when distributed. Thisreport may not be reproduced or redistributed, in whole or in part, without the express written consent of AltaVista. Attribution“Standard & Poor’s Depository Receipt”, “SPDR” and “Select Sector SPDR” are trademarks Standard & Poor’s, a division of the McGraw-Hill Companies, Inc. Standard & Poor’s has not reviewed this material and does not sponsor, endorse, or sell it. RisksSelect Sector SPDR Fund shareholders are subject to risks similar to those of holders of other sector stock portfolios. One primaryconsideration is that the general level of stock prices may decline, and thus the value of Select Sector SPDRs may decline. A SelectSector SPDR Fund may also be adversely affected by the performance of the specific sector or group of industries upon which it isbased. You can expect that shares in a Select Sector SPDR Fund will move up or down in value with the value of its related SelectSector Index. In addition, the overall depth and liquidity of the secondary market in these shares may fluctuate.

Although Select Sector SPDR Funds are designed to provide investment results that, before expenses, generally correspond to the priceand yield performance of their related Select Sector Indexes, the Funds of the Select Sector SPDR Trust may not be able to exactlyreplicate the performance of the Select Sector Indexes because of expenses and other factors.

Over time, the stock holdings of each Select Sector SPDR Fund may be rebalanced to reflect changes in the composition of its relatedindex. A Select Sector SPDR Fund would incur transaction costs and other expenses as a result of rebalancing. Furthermore, a SelectSector SPDR Fund would realize capital gains or losses from the sale of securities in a rebalancing. Net long-term capital gains, if any,will be distributed to shareholders as capital gains distributions at least annually.

From a tax standpoint, you should be aware that the Trust is structured as a regulated investment company, and that dividenddistributions may not be characterized entirely as ordinary income. You may wish to consult your tax adviser in this regard.

There are no sales loads on Select Sector SPDR shares but ordinary brokerage commissions may apply and this expense is not reflectedin performance calculations.

The stocks included in each Select Sector Index were selected by the compilation agent. Their composition and weighting can beexpected to differ to that in any similar indexes that are published by the S&P.

Data Definitions & ReliabilityAltaVista believes the information contained in this report to be reasonably accurate at the time of publication, but makes no warrantieswith respect to its accuracy. Calculations of fundamental data are based on a weighted average of consensus estimates and reportedresults for current index constituents. As a result, historical figures for fundamental data such as dividends per share may not reflectthose actually paid by the fund. To the extent that index reconstitution and rebalancing have altered fund composition, thesedifferences may be significant. Definitions for some commonly used financial terms are as follows:

Earnings/Net Income: Unless denoted as a GAAP figure, earnings are calculated on a “pro forma” basis using consensus EPS results/estimates for the individual constituents of each fund, multiplied by the float-adjusted shares outstanding.Cash Flow: Adds depreciation and amortization to consensus earnings estimatesStandard deviation: Statistical measure of price volatility using 3 years of monthly return data. Figures are annualized.Beta: Measures relative volatility of ETF versus S&P 500 by comparing 3 years of monthly return data.Book Value: Common Equity as reported by fund constituents according to GAAP. Forecasts reflect pro-forma calculations using most recently reported figures, plus earnings less dividends.Dividends per share-gross: Dividends paid by companies in the fund on a "pro forma" basis. Differs from actual dividends paid by the fund to shareholders due to index changes over time and fund expenses, as well as timing of distributions.Return on Equity: Net income divided by average common equity over the period. Long-term growth: Uses consensus estimates of 3-5 year earnings growth for individual constituents of each fund to calculate a float-adjusted earnings-weighted growth rate for the fund as a whole.Trend in Current FY Estimates: Illustrates changes in consensus estimates over time by examining the monthly change in current

Additional information is available upon request.

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www.altavista-research.com

ALPS Distributor, Inc., a registered broker-dealer, is distributor for the Select Sector SPDR Trust and has paid a license fee to AltaVista Research to redistribute this report.

How to use this guide How to use this guide

A fundamentally different approachThis guide presents fundamental data and analysis on each of the nine Select Sector SPDR funds so you can view and value them the way you would a single stock. Each Fund Detail page covers a single Sector SPDR with a wealth of information, organized into three sections: Investment Summary, Fundamentals, and Composition. The diagram below illustrates and explains each feature.

A Valuation Guide also helps you quickly see how each Select Sector SPDR is valued on a variety of forward-looking valuation metrics, both against other Sector SPDRs as well as the S&P 500. Use this data and analysis as a reference to help you make timely and informed decisions based on your own investment objectives.

TickerFund basics:

The ALTAR™ score

ALTAR™ score:

Our proprietary measure of an ETF’s long-term investment potential (see explanation below)

Analyst’s view:

Quick take on the real driver behind the fund’s investment merit

Industry breakdown:

Shows how important various industries are within the larger sector

Top 10 Holdings:

See what’s under the hood—and how concentrated the fund is

Keeping up-to-date

Return on Equity:

Details on one of the most important questions a shareholder can ask

Trend in Estimates:

See where earnings estimates are being raised, and where they are being slashed

Valuation metrics:

Even funds full of good companies can be bad investments. See how much the market is paying so you can make an informed investment decision.

Expenses, returns, volume and more

See how this fund has performed in the past

Fund name PriceTrading history:

Results & estimates:

Financial results and expectations for the fund’s constituents—essential data for making an informed investment

Compound growth rates:

Take the long view with a five year measure of financial performance

Description:

The fund’s objective and where you can find more information

The AltaVista Long Term Annual Return (ALTAR™) forecast is AltaVista’s proprietary measure of an ETF’s long run investment potential based on the likely internal return to new shareholders. It is calculated by dividing the average return on equity (ROE) by the price-to-book value (P/BV) multiple, less the fund’s expense ratio. It can be used to compare ETFs on investment merit, but is not intended as a prediction of future market performance. For more information go to www.altavista-research.com/altar.htm.

Market conditions and earnings expectations are changing all the time. Keep up-to-date with free monthly updates to this guide at www.sectorspdrs.com under “Research.” Those needing more frequent updates can subscribe to the ETF Research Center at www.etfresearchcenter.com. It contains daily updates on fundamentals and valuation metrics for each of the Sector SPDRs plus all the other ETFs covered by AltaVista, and includes AltaVista’s monthly newsletter, ETF Advisor, to keep you abreast of how changes in the economy and market may affect the investment outlook.

Table of Contents

ETF Analyzer: Select Sector SPDR edition

Market Activity & Breakdown 5Valuation Guide 6

XLY Consumer Discretionary Sector SPDR 7XLP Consumer Staples Sector SPDR 8XLE Energy Sector SPDR 9XLF Financial Sector SPDR 10XLV Health Care Sector SPDR 11XLI Industrial Sector SPDR 12XLB Materials Sector SPDR 13XLK Technology Sector SPDR 14XLU Utilities Sector SPDR 15

ALPS Distributor Inc. is distributor for the Select Sector SPDR Trust. (C) 2009 AltaVista Research, LLC. All Rights Reserved. This report is provided for informational purposes only, and AltaVista makes no warranties with respect to its accuracy. See Disclosure page for additional disclosures.

Market Activity & Breakdown

Total Returns* (last month & one year) Changes in Shares Outstanding (last month & one year)

Short Interest (as a percentage of total shares outstanding)

Assets Under Management ($mns) S&P500 Market Cap by Sector ($bns) S&P500 2010E Profits by Sector ($bns)

S&P500 Operating Earnings (4 qtrs. rolling, 1950-present) S&P500 Forward P/E multiple on Trend-line EPS

September 30, 2010

*NOTE: The performance data quoted represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the performance quoted. Investment return and principal value will vary, and shares, when redeemed, may be worth more or less than their original cost. Additional performance info current to most recent month-end at www.sectorspdr.com/performance.

ALPS Distributor Inc. is distributor for the Select Sector SPDR Trust. (C) 2010 AltaVista Research, LLC. All Rights Reserved.This report is provided for informational purposes only, and AltaVista makes no warranties with respect to its accuracy. See Disclosure page for additional disclosures.

Sector SPDRs

XLY, $1,757

XLP, $3,233

XLE, $6,263

XLF, $5,733XLV,

$2,722

XLI, $2,985

XLB, $2,148

XLK, $4,255

XLU, $4,141

Cons. Discr., $1,098 Staples,

$1,184

Energy, $1,073

Finc., $1,558

Health Care,

$1,161Industrials, $1,126

Materials, $358

Tech & Tel,

$2,346

Utilities, $369

Cons. Discr., $80.9 Staples,

$86.4

Energy, $102.0

Finc., $143.4

Health Care,

$106.8

Industrials, $82.9

Materials, $27.2

Tech & Tel,

$181.3

Utilities, $29.9

11%

6%

10%

6%

9%

12%

8%

12%

3%

23%

13%

6%

-3%

8%

21%

9%

12%

11%

-5% 0% 5% 10% 15% 20% 25%

Discretionary (XLY)

Staples (XLP)

Energy (XLE)

Financials (XLF)

Health Care (XLV)

Industrials (XLI)

Materials (XLB)

Technology (XLK)

Utilities (XLU)

1 Month 1 Year

-6%

-1%

4%

-5%

4%

4%

9%

7%

0%

11%

59%

18%

-27%

33%

20%

16%

0%

60%

-40% -20% 0% 20% 40% 60% 80%

Discretionary (XLY)

Staples (XLP)

Energy (XLE)

Financials (XLF)

Health Care (XLV)

Industrials (XLI)

Materials (XLB)

Technology (XLK)

Utilities (XLU)

1 Month 1 Year

56%

12%

29%36%

28% 27% 31%

16% 13%

0%10%20%30%40%50%60%

Discretionary (XLY) Staples (XLP) Energy (XLE) Financials (XLF) Health Care (XLV) Industrials (XLI) Materials (XLB) Technology (XLK) Utilities (XLU)

R² = 98%

$1

$10

$100

1950 1960 1970 1980 1990 2000 2010 2020

trend lineEPS

05

101520253035

1950 1960 1970 1980 1990 2000 2010 2020

average = 14.6xP/E (x)

Select Sector SPDRs

ALTAR™ Score

Calculation of ALTAR™ Score ALTAR™ Score vs. Ann. Standard Deviation (3yr)Avg. ROE Div. by Less equals(06-10E) 10 P/BV Exp. ALTAR™

Discretionary (XLY) 11.9% 2.4x 21 bp 4.8%Staples (XLP) 20.6% 2.9x 21 bp 6.8%Energy (XLE) 19.1% 1.7x 21 bp 10.8%Financials (XLF) 8.5% 0.9x 21 bp 9.3%Health Care (XLV) 20.5% 1.9x 21 bp 10.6%Industrials (XLI) 17.4% 2.4x 21 bp 7.0%Materials (XLB) 15.8% 2.1x 21 bp 7.1%Technology (XLK) 17.6% 2.6x 21 bp 6.4%Utilities (XLU) 12.1% 1.4x 21 bp 8.7%

Valuation multiples (based on 2010 estimates)Price P/E PEG P/CF P/Sales P/BV Yield

Discretionary (XLY) $33.41 15.4 1.1 9.4 1.0 2.4 1.4Staples (XLP) $27.88 14.7 1.5 10.7 0.9 2.9 2.9Energy (XLE) $56.06 12.9 0.8 6.5 0.9 1.7 1.9Financials (XLF) $14.34 13.5 1.6 11.2 1.3 0.9 1.2Health Care (XLV) $30.49 11.6 1.3 8.9 1.1 1.9 2.1Industrials (XLI) $31.28 16.0 1.2 10.3 1.1 2.4 2.1Materials (XLB) $32.78 16.6 1.6 10.2 1.1 2.1 1.9Technology (XLK) $23.02 14.4 1.1 9.1 2.0 2.6 1.5Utilities (XLU) $31.38 12.5 3.2 5.9 1.1 1.4 4.3

S&P500 1,141.20 13.8 1.2 9.0 1.2 1.8 1.9

Earnings per share growth Yield vs. long-term growth

Note: All valuation metrics on this page calculated based on consensus estimates of current fund constituents, as collected by Thomson/Reuters and Bloomberg. Definitions of technical terms can be found on page 2 of this document.

This page provides a summary of valuation metrics for the Select Sector SPDRs and S&P 500 which may be considered when buying or selling these funds.

September 30, 2010

NOTE: The AltaVista Long Term Annual Return (ALTAR) forecast is our proprietary measure of an ETF's likely internal return to new shareholders over thecoming years. It is calculated by dividing average Return on Equity by the price-to-book value multiple, less the fund's expense ratio. It can be used to comparefunds based on investment merit, but it is not intended as a prediction of future performance. For more information go to www.altavista-research.com/altar.htm

4.8%

6.8%

10.8%9.3%

10.6%

7.0% 7.1% 6.4%

8.7%

0%

2%

4%

6%

8%

10%

12%

Discretionary (XLY) Staples (XLP) Energy (XLE) Financials (XLF) Health Care (XLV) Industrials (XLI) Materials (XLB) Technology (XLK) Utilities (XLU)

Valuation Guide

52%

8%

50%

8%

26%

86%

38%

5%

14%

9%

16%

28%

8%

18% 28

%

11%

2%

0%

20%

40%

60%

80%

100%

XLY XLP XLE XLF XLV XLI XLB XLK XLU

2010 2011 137%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

3% 5% 7% 9% 11% 13% 15% 17%

XLK

XLEXLI

XLP

XLV

XLU

XLF XLB XLY

Yiel

d

LT growth

ALPS Distributor Inc. is distributor for the Select Sector SPDR Trust. (C) 2010 AltaVista Research, LLC. All Rights Reserved. This report is provided for informational purposes only, and AltaVista makes no warranties with respect to its accuracy. See Disclosure page for additional disclosures.

0%2%4%6%8%

10%12%

10% 15% 20% 25% 30% 35% 40%

XLY

XLF

XLE

XLI

XLP

XLV

XLU XLBXLK

ann. std. dev.

ALTA

R

Consumer Discretionary Sector SPDR XLY

Trading History Fund basics ALTAR™ score

Fund assets ($mns) 1,757Avg. volume (000) 7,262Expense ratio (bp) 21Total returns (market)* One year 23.3% Five year 1.9% Valuation metrics 2010E 2011E Ten year 4.1% Price-to-Earnings 15.4 13.5 Since inception 3.3% Price-to-Cash Flow 9.4 8.6Beta vs. S&P 500 1.16 Price-to-Sales 1.0 0.9Standard deviation 25.7% Price-to-Book Value 2.4 2.1*as of 09/30/10. See Notes. Yield (%) 1.4 1.5

Analyst's view:

Results & estimates* Other Fundamental Data2005 2006 2007 2008 2009 2010E 2011E

Sales per share $32.30 $34.44 $36.25 $35.49 $32.39 $34.79 $36.77 LT growth est. 13.2%EPS $1.74 $1.61 $1.64 $1.26 $1.43 $2.17 $2.48 Payout ratio 22.8%Change (%) -7.7% 2.0% -23.4% 13.7% 51.8% 14.3% Foreign sales 28.5%Net margin 5.4% 4.7% 4.5% 3.5% 4.4% 6.2% 6.7% Debt-to-equity 1.2xBook value per share $14.29 $14.96 $15.05 $11.99 $12.50 $14.17 $16.12Dividends per share-gross $0.30 $0.38 $0.41 $0.47 $0.41 $0.49 $0.53*pro forma based on current fund constituents. See disclosures.

Return on Equity Trend in Current FY Estimates Compound growth rates (2005-10E)

Top 10 Holdings Industry Breakdown Description

MCDONALD'S CORP 7.4%WALT DISNEY CO/THE 5.9%AMAZON.COM INC 5.2%HOME DEPOT INC 4.9%COMCAST CORP-CL A 4.8%FORD MOTOR CO 4.0%TARGET CORP 3.7%DIRECTV GROUP INC/THE 3.3%TIME WARNER INC 3.2%NEWS CORP-CL A 2.9%

TOTAL 45.3%

September 30, 2010

33.41$

NOTES: The performance data quoted represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the performance quoted. Investment return and principal value will vary, and shares, when redeemed, may be worth more or less than their original cost. Additional performance info current to most recent month-end at www.sectorspdr.com/performance.

Estimates had been rising nicely but have recently stalled. In any case, expectations for this year and next, which imply record levels of profitability (for both margins and return on equity), appear overly optimistic given persistent unemployment and the shift by consumers away from debt in favor of saving. Meanwhile with its rich valuation multiples XLY continues to have the lowest ALTAR Score of any Sector SPDR.

Select Sector SPDR® holding S&P 500 stocks in the Consumer Discretionary sector. Component industries include Autos & Components; Durables & Apparel; Hotels, Restaurants & Leisure; Media; and Retailing. The fund seeks investment results that, before expenses, generally correspond to the price and yield performance of the benchmark index. For product information and a prospectus visit www.sectorspdr.com.


12.7%11.0% 11.0%

9.3%11.7%

16.3% 16.4%

0%2%4%6%8%

10%12%14%16%18%

2005 2006 2007 2008 2009 2010 2011

Autos & parts

Durables

Media

Retail

Leisure

$10$15$20$25$30$35$40$45

1999 2001 2003 2005 2007 2009 2011

Composition

Fundamentals

Investment Summary

Fundamentals

4.8%

7.7%

XLY

S&P500

949698

100102104106108110

6 mo 5 mo 4 mo 3 mo 2 mo 1 mo today

10.7%

0.0%

4.5%

1.5%

0% 5% 10% 15%

DPS

Bk Val

EPS

Sales

4.8%

7.7%

XLY

S&P500

Consumer Staples Sector SPDR XLP



Analyst's view:


Sales per share $24.33 $26.83 $29.06 $31.31 $31.10 $32.10 $33.56 LT growth est. 9.6%EPS $1.55 $1.63 $1.73 $1.76 $1.75 $1.90 $2.07 Payout ratio 43.5%Change (%) 4.6% 6.3% 1.5% -0.1% 8.4% 8.9% Foreign sales 28.2%Net margin 6.4% 6.1% 5.9% 5.6% 5.6% 5.9% 6.2% Debt-to-equity 0.8xBook value per share $6.68 $8.11 $8.90 $7.99 $8.48 $9.55 $10.72Dividends per share-gross $0.61 $0.55 $0.62 $0.69 $0.76 $0.83 $0.90*pro forma based on current fund constituents. See disclosures.



PROCTER & GAMBLE CO/THE 15.3%WAL-MART STORES INC 9.5%PHILIP MORRIS INTERNATIONAL 9.0%COCA-COLA CO/THE 6.9%KRAFT FOODS INC-CLASS A 4.9%PEPSICO INC 4.6%ALTRIA GROUP INC 4.4%CVS CAREMARK CORP 4.1%COLGATE-PALMOLIVE CO 3.7%WALGREEN CO 2.7%

TOTAL 65.2%

September 30, 2010

27.88$


Profits are forecast to post their biggest increases in 2010 in at least five years, on modest but combined increases in both sales and profit margins. From a long-term perspective, XLP's rich price-to-book value multiple fully reflects the sector's relatively high and stable profitability (ROE), resulting in an ALTAR Score slightly below average. Nonetheless XLP is also the least volatile of the nine Sector SPDRs, giving it an attractive risk/reward profile overall in our opinion.

Select Sector SPDR® holding S&P 500 stocks in the Consumer Staples sector. Component industries include Food & Staples Retailing, Food, Beverage & Tobacco producers, and Household and Personal Products companies. The fund seeks investment results that, before expenses, generally correspond to the price and yield performance of the benchmark index. For product information and a prospectus visit www.sectorspdr.com.


21.6%19.8% 20.1% 20.7% 21.3% 21.1% 20.4%

0%

5%

10%

15%

20%

25%

30%

2005 2006 2007 2008 2009 2010 2011

Food & Staples Retail

Food, Bvg &

Tobacco

HH & Personal Products

$10

$15

$20

$25

$30

$35

1999 2001 2003 2005 2007 2009 2011

Composition

Fundamentals

Investment Summary

Fundamentals

6.8%

7.7%

XLP

S&P500

6.2%

7.4%

4.1%

5.7%

0% 5% 10%

DPS

Bk Val

EPS

Sales

6.8%

7.7%

XLP

S&P500

949596979899

100101102


Energy Sector SPDR XLE



Analyst's view:





EXXON MOBIL CORP 18.5%CHEVRON CORP 14.3%SCHLUMBERGER LTD 7.5%CONOCOPHILLIPS 5.4%OCCIDENTAL PETROLEUM CORP 4.7%APACHE CORP 3.6%HALLIBURTON CO 3.1%ANADARKO PETROLEUM CORP 2.9%DEVON ENERGY CORPORATION 2.8%EOG RESOURCES INC 2.5%

TOTAL 65.2%

September 30, 2010

56.06$

Select Sector SPDR® holding S&P 500 stocks in the Energy sector. The fund seeks investment results that, before expenses, generally correspond to the price and yield performance of the benchmark index. For product information and a prospectus visit www.sectorspdr.com.


Consensus estimates predict a large bounce in both sales and earnings versus last year, although these are highly uncertain and profitability (margins and ROE) is forecast to remain well below prior peaks. XLE does enjoy an ALTAR Score well above average thanks to low valuation multiples (relative to average profits over the course of the boom/bust cycle) but politics and the shift to "new" natural gas--not to mention the chance of a double-dip recession--all make this one of the riskier sectors.


24.7% 24.5%22.1%

24.5%

10.1%14.0% 14.6%

0%

5%

10%

15%

20%

25%

30%

2005 2006 2007 2008 2009 2010 2011

Energy

$0

$20

$40

$60

$80

$100

1999 2001 2003 2005 2007 2009 2011

Composition

Fundamentals

Investment Summary

Fundamentals

10.8%

7.7%

XLE

S&P500

80

85

90

95

100

105

6 mo 3 mo today

11.2%

10.8%

n/m

2.7%

0% 5% 10% 15%

DPS

Bk Val

EPS

Sales

10.8%

7.7%

XLE

S&P500

Financial Sector SPDR XLF


Fund assets ($mns) 5,733Avg. volume (000) 74,952Expense ratio (bp) 21Total returns (market)* One year -3.0% Five year -11.2% Valuation metrics 2010E 2011E Ten year -4.7% Price-to-Earnings 13.5 10.6 Since inception -2.0% Price-to-Cash Flow 11.2 9.2Beta vs. S&P 500 1.50 Price-to-Sales 1.3 1.3Standard deviation 37.1% Price-to-Book Value 0.9 0.8*as of 09/30/10. See Notes. Yield (%) 1.2 1.7

Analyst's view:


Sales per share $8.24 $8.99 $9.34 $7.75 $10.60 $10.86 $10.87 LT growth est. 8.0%EPS $1.72 $2.13 $1.75 -$0.15 $0.45 $1.06 $1.36 Payout ratio 16.7%Change (%) 23.5% -17.8% -108.4% -401.4% 136.8% 27.8% Foreign sales 32.8%Net margin 20.9% 23.7% 18.7% -1.9% 4.2% 9.8% 12.5% Debt-to-equity 3.3xBook value per share $9.43 $11.09 $12.01 $12.96 $15.11 $16.05 $17.16Dividends per share-gross $0.91 $1.01 $1.12 $0.87 $0.19 $0.18 $0.25*pro forma based on current fund constituents. See disclosures.



JPMORGAN CHASE & CO 9.7%BERKSHIRE HATHAWAY INC-CL A 8.8%BANK OF AMERICA CORP 8.4%WELLS FARGO & CO 8.2%CITIGROUP INC 5.7%GOLDMAN SACHS GROUP INC 4.7%AMERICAN EXPRESS CO 2.8%US BANCORP 2.6%METLIFE INC 2.2%MORGAN STANLEY 2.2%

TOTAL 55.1%

September 30, 2010

14.34$


Although profits will likely more than double in 2010, they will remain far below the levels of earlier in the decade, and the sector probably has more political risk than any other. Further, while the ALTAR Score suggests above average appreciation potential, investors should consider the high degree of uncertainty in estimates, as well as the possibility that return on equity (on which our rating is based) may in fact never return to its prior levels.

Select Sector SPDR® holding S&P 500 stocks in the Financial sector. Component industries include Banks; Diversified Financials; Insurance; and Real Estate Investment Trusts. The fund seeks investment results that, before expenses, generally correspond to the price and yield performance of the benchmark index. For product information and a prospectus visit www.sectorspdr.com.


17.7%19.5%

14.3%

-1.1%

3.2%6.8% 8.2%

-5%

0%

5%

10%

15%

20%

25%

2005 2006 2007 2008 2009 2010 2011

Banks

Diversified

Insurance

Real Estate

$0$5

$10$15$20$25$30$35$40

1999 2001 2003 2005 2007 2009 2011

Composition

Fundamentals

Investment Summary

Fundamentals

9.3%

7.7%

XLF

S&P500

90

95

100

105

110

115

120


n/m

11.2%

5.7%

0% 5% 10% 15%

DPS

Bk Val

EPS

Sales

n/m

9.3%

7.7%

XLF

S&P500

Health Care Sector SPDR XLV



Analyst's view:


Sales per share $18.69 $20.90 $22.82 $24.51 $25.70 $29.03 $29.92 LT growth est. 8.3%EPS $1.82 $1.93 $2.22 $2.43 $2.44 $2.64 $2.84 Payout ratio 25.2%Change (%) 6.0% 14.8% 9.4% 0.5% 7.8% 7.7% Foreign sales 18.8%Net margin 9.7% 9.2% 9.7% 9.9% 9.5% 9.1% 9.5% Debt-to-equity 0.4xBook value per share $9.15 $10.07 $10.47 $10.26 $14.16 $16.13 $18.27Dividends per share-gross $0.52 $0.59 $0.65 $0.71 $0.65 $0.66 $0.71*pro forma based on current fund constituents. See disclosures.



JOHNSON & JOHNSON 14.2%PFIZER INC 11.6%MERCK & CO. INC. 9.5%ABBOTT LABORATORIES 5.6%AMGEN INC 4.5%BRISTOL-MYERS SQUIBB CO 3.9%UNITEDHEALTH GROUP INC 3.4%MEDTRONIC INC 3.0%ELI LILLY & CO 3.0%GILEAD SCIENCES INC 2.5%

TOTAL 61.3%

September 30, 2010

30.49$


Consensus estimates suggest sales growth in 2010 could rebound by double-digits but a dip in margins will limit EPS growth. Meanwhile, the apparent trend towards lower profitability (ROE) bears watching because it implies slower earnings growth going forward over the long-term. Nonetheless, XLV currently trades at lowest P/E multiple of any Sector SPDR (despite historically trading at a premium to the S&P500) and enjoys an ALTAR Score well above average.

Select Sector SPDR® holding S&P 500 stocks in the Health Care sector. Component industries include Health Care Equipment & Services; and Pharmaceutical & Biotechnology. The fund seeks investment results that, before expenses, generally correspond to the price and yield performance of the benchmark index. For product information and a prospectus visit www.sectorspdr.com.


20.6% 20.0% 21.6%23.4%

20.0%17.4% 16.5%

0%

5%

10%

15%

20%

25%

30%

2005 2006 2007 2008 2009 2010 2011

Equip & Svcs.

Pharma & Biotech

$15

$20

$25

$30

$35

$40

1999 2001 2003 2005 2007 2009 2011

Composition

Fundamentals

Investment Summary

Fundamentals

10.6%

7.7%

XLV

S&P500

949596979899

100101102103104


4.9%

12.0%

7.7%

9.2%

0% 5% 10% 15%

DPS

Bk Val

EPS

Sales

10.6%

7.7%

XLV

S&P500

Industrial Sector SPDR XLI



Analyst's view:





GENERAL ELECTRIC CO 11.2%UNITED TECHNOLOGIES CORP 5.8%UNITED PARCEL SERVICE-CL B 5.8%3M CO 5.4%CATERPILLAR INC 4.5%BOEING CO 4.2%UNION PACIFIC CORP 3.8%EMERSON ELECTRIC CO 3.6%HONEYWELL INTERNATIONAL INC 3.1%DEERE & CO 2.9%

TOTAL 50.2%

September 30, 2010

31.28$

Select Sector SPDR® holding S&P 500 stocks in the Industrials sector. Component industries include Capital Goods; Commercial Services & Supplies; and Transportation firms. The fund seeks investment results that, before expenses, generally correspond to the price and yield performance of the benchmark index. For product information


Sales may pick up modestly this year and next after a devastating double-digit decline in 2009, and with capacity utilization starting to recover margins could improve as well. Expectations have improved markedly in recent months. Still, return on equity is likely to recover only gradually, and in any case valuations appear to already reflect an eventual recovery, resulting in a roughly average ALTAR Score and risk/reward profile for this cyclical sector.


15.9%17.9% 19.2% 20.1%

14.0%15.9% 16.7%

0%

5%

10%

15%

20%

25%

2005 2006 2007 2008 2009 2010 2011

Capital Goods

Com. Svcs

Transport

$0$5

$10$15$20$25$30$35$40$45

1999 2001 2003 2005 2007 2009 2011

Composition

Fundamentals

Investment Summary

Fundamentals

7.0%

7.7%

XLI

S&P500

96

98

100

102

104

106

108

110


3.2%

3.1%

2.4%

3.1%

0% 2% 4%

DPS

Bk Val

EPS

Sales

7.0%

7.7%

XLI

S&P500

Materials Sector SPDR XLB



Analyst's view:


Sales per share $29.11 $30.94 $32.66 $33.99 $25.97 $30.46 $32.69 LT growth est. 9.9%EPS $2.09 $2.55 $2.71 $2.33 $1.07 $1.98 $2.53 Payout ratio 31.7%Change (%) 21.9% 6.1% -14.1% -54.1% 85.5% 27.9% Foreign sales 41.8%Net margin 7.2% 8.3% 8.3% 6.8% 4.1% 6.5% 7.8% Debt-to-equity 0.9xBook value per share $11.97 $12.22 $15.93 $11.92 $13.93 $15.29 $17.14Dividends per share-gross $0.76 $0.95 $0.88 $0.92 $0.62 $0.63 $0.68*pro forma based on current fund constituents. See disclosures.



DU PONT (E.I.) DE NEMOURS 10.9%FREEPORT-MCMORAN COPPER 10.7%DOW CHEMICAL 8.6%MONSANTO CO 7.9%PRAXAIR INC 7.3%NEWMONT MINING CORP 5.6%AIR PRODUCTS & CHEMICALS INC 4.8%ALCOA INC 3.4%PPG INDUSTRIES INC 3.3%ECOLAB INC 3.2%

TOTAL 65.7%

September 30, 2010

32.78$

Select Sector SPDR® holding S&P 500 stocks in the Basic Materials sector. The fund seeks investment results that, before expenses, generally correspond to the price and yield performance of the benchmark index. For product information and a prospectus visit www.sectorspdr.com.


Sales and earnings are forecast to post healthy gains both this year and next as commodity prices rebound, although margins and return on equity remain well below prior peaks and estimates have been trending in the wrong direction on recent months. In any case, we fail to see why this sector, subject to the same boom-bust forces as Energy firms (XLE), should enjoy a valuation premium given profitability (ROE) that is lower on average.


17.6%

21.1%19.3%

16.7%

8.3%

13.6%15.6%

0%

5%

10%

15%

20%

25%

2005 2006 2007 2008 2009 2010 2011

Materials

$0

$10

$20

$30

$40

$50

1999 2001 2003 2005 2007 2009 2011

Composition

Fundamentals

Investment Summary

Fundamentals

7.1%

7.7%

XLB

S&P500

80

85

90

95

100

105

110


n/m

5.0%

0.0%

0.9%

0% 2% 4% 6%

DPS

Bk Val

EPS

Sales

7.1%

7.7%

XLB

S&P500

Technology Sector SPDR XLK


Fund assets ($mns) 4,255Avg. volume (000) 10,734Expense ratio (bp) 21Total returns (market)* One year 11.8% Five year 3.2% Valuation metrics 2010E 2011E Ten year -5.9% Price-to-Earnings 14.4 13.0 Since inception -2.0% Price-to-Cash Flow 9.1 8.3Beta vs. S&P 500 1.06 Price-to-Sales 2.0 1.8Standard deviation 23.4% Price-to-Book Value 2.6 2.3*as of 09/30/10. See Notes. Yield (%) 1.5 1.6

Analyst's view:





APPLE INC 11.6%MICROSOFT CORP 8.2%INTL BUSINESS MACHINES CORP 7.3%AT&T INC 7.3%GOOGLE INC-CL A 5.7%CISCO SYSTEMS INC 5.5%ORACLE CORP 4.6%VERIZON COMMUNICATIONS INC 4.0%INTEL CORP 4.0%HEWLETT-PACKARD CO 3.3%

TOTAL 61.6%

September 30, 2010

23.02$


After a relatively mild and short-lived earnings decline, the sector appears to be firing on all cylinders, with healthy gains in both sales and earnings forecast for this year and next. However, that may prove optimistic if Tech firms miss the aggressive profit margins implied by those same forecasts. In any case, XLK's lofty P/BV multiples more than reflect the sector's profitability (ROE) resulting in a below average ALTAR Score, although P/E multiples appear more reasonable.

Select Sector SPDR® holding S&P 500 stocks in the Technology sector. Component industries include Semiconductors & Semi Equipment; Software & Services; Tech Hardware & Equipment; and Telecommunication Services. The fund seeks investment results that, before expenses, generally correspond to the price and yield performance of the benchmark index. For product information and a prospectus visit www.sectorspdr.com.


16.3% 16.3% 17.0%18.7%

16.4%19.7% 18.8%

0%

5%

10%

15%

20%

25%

2005 2006 2007 2008 2009 2010 2011

Semis

SoftwareHardware

Telecom

$0$10$20$30$40$50$60$70

1999 2001 2003 2005 2007 2009 2011

Composition

Fundamentals

Investment Summary

Fundamentals

6.4%

7.7%

XLK

S&P500

95

100

105

110


10.2%

7.7%

11.3%

7.0%

0% 5% 10% 15%

DPS

Bk Val

EPS

Sales

6.4%

7.7%

XLK

S&P500

Utilities Sector SPDR XLU



Analyst's view:





SOUTHERN CO 8.2%EXELON CORP 7.5%DOMINION RESOURCES INC/VA 6.9%NEXTERA ENERGY GROUP 6.0%DUKE ENERGY CORP 5.8%P G & E CORP 4.8%AMERICAN ELECTRIC POWER 4.6%PUBLIC SERVICE ENTERPRISE GP 4.4%ENTERGY CORP 3.8%CONSOLIDATED EDISON INC 3.7%

TOTAL 55.7%

September 30, 2010

31.38$

Select Sector SPDR® holding S&P 500 stocks in the Utilities sector. The fund seeks investment results that, before expenses, generally correspond to the price and yield performance of the benchmark index. For product information and a prospectus visit www.sectorspdr.com.


Earnings should return to growth this year in concert with the overall economy, and valuations remain modest resulting in an above-average ALTAR Score. But Return on Equity appears to be in secular decline, and the outlook for the sector is particularly clouded by potential policy changes, from cap-and-trade emissions limits, nuclear permitting, investments in alternative sources, and higher taxes on dividends.


13.1% 12.5% 12.7% 12.9%11.4% 11.1% 10.8%

0%

5%

10%

15%

2005 2006 2007 2008 2009 2010 2011

Utilities

$0

$10

$20

$30

$40

$50

1999 2001 2003 2005 2007 2009 2011

Composition

Fundamentals

Investment Summary

Fundamentals

8.7%

7.7%

XLU

S&P500

96979899

100101102103104


4.1%

7.4%

3.7%

1.7%

0% 5% 10%

DPS

Bk Val

EPS

Sales

Documents

ETF - AltaVista Research SPDR Analyzer 100110.pdf · 10/1/2010 · The AltaVista Long Term Annual Return (ALTAR™) forecast is AltaVista’s proprietary measure of an ETF’slong