Is First Trust NASDAQ Semiconductor ETF (FTXL) a Strong ETF Right Now?
Making its debut on 09/20/2016, smart beta exchange traded fund First Trust NASDAQ Semiconductor ETF (FTXL) provides investors broad exposure to the Technology ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FTXL has been able to amass assets over $1.02 billion, making it one of the larger ETFs in the Technology ETFs. This particular fund seeks to match the performance of the Nasdaq US Smart Semiconductor Index before fees and expenses.
The Nasdaq US Smart Semiconductor Index is a modified factor weighted index, designed to provide exposure to US companies within the semiconductor industry.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for this ETF are 0.60%, making it on par with most peer products in the space.
FTXL's 12-month trailing dividend yield is 0.82%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For FTXL, it has heaviest allocation in the Information Technology sector --about 100% of the portfolio.
Looking at individual holdings, Intel Corporation (INTC) accounts for about 9.65% of total assets, followed by Broadcom Inc. (AVGO) and Micron Technology, Inc. (MU).
FTXL's top 10 holdings account for about 64.48% of its total assets under management.
Performance and Risk
The ETF return is roughly 17.55% and it's up approximately 22.30% so far this year and in the past one year (as of 10/31/2023), respectively. FTXL has traded between $47.82 and $75.36 during this last 52-week period.
The fund has a beta of 1.29 and standard deviation of 34.41% for the trailing three-year period. With about 32 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust NASDAQ Semiconductor ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Semiconductor ETF (SOXX) tracks PHLX SOX Semiconductor Sector Index and the VanEck Semiconductor ETF (SMH) tracks MVIS US Listed Semiconductor 25 Index. IShares Semiconductor ETF has $7.90 billion in assets, VanEck Semiconductor ETF has $9.02 billion. SOXX has an expense ratio of 0.35% and SMH charges 0.35%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Technology ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
First Trust NASDAQ Semiconductor ETF (FTXL): ETF Research Reports
Intel Corporation (INTC) : Free Stock Analysis Report
Micron Technology, Inc. (MU) : Free Stock Analysis Report
Broadcom Inc. (AVGO) : Free Stock Analysis Report
VanEck Semiconductor ETF (SMH): ETF Research Reports
iShares Semiconductor ETF (SOXX): ETF Research Reports
