Is First Trust NASDAQ Semiconductor ETF (FTXL) a Strong ETF Right Now?
A smart beta exchange traded fund, the First Trust NASDAQ Semiconductor ETF (FTXL) debuted on 09/20/2016, and offers broad exposure to the Technology ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $1.08 billion, this makes it one of the larger ETFs in the Technology ETFs. FTXL is managed by First Trust Advisors. Before fees and expenses, FTXL seeks to match the performance of the Nasdaq US Smart Semiconductor Index.
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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.60%.
FTXL's 12-month trailing dividend yield is 0.74%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
For FTXL, it has heaviest allocation in the Information Technology sector --about 100% of the portfolio.
When you look at individual holdings, Intel Corporation (INTC) accounts for about 8.95% of the fund's total assets, followed by Broadcom Inc. (AVGO) and Micron Technology, Inc. (MU).
FTXL's top 10 holdings account for about 60.76% of its total assets under management.
Performance and Risk
The ETF has gained about 26.31% and is up roughly 6.52% so far this year and in the past one year (as of 06/08/2023), respectively. FTXL has traded between $46.03 and $67.25 during this last 52-week period.
The fund has a beta of 1.28 and standard deviation of 34.89% for the trailing three-year period. With about 32 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust NASDAQ Semiconductor ETF is a reasonable option for investors seeking to outperform the Technology ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
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 $8.24 billion in assets, VanEck Semiconductor ETF has $9.22 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.
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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
