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?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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
The fund is managed by First Trust Advisors. FTXL has been able to amass assets over $1.18 billion, making it one of the larger ETFs in the Technology ETFs. 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.
Annual operating expenses for FTXL are 0.60%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.73%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Representing 100% of the portfolio, the fund has heaviest allocation to the Information Technology sector.
Looking at individual holdings, Broadcom Inc. (AVGO) accounts for about 9.90% of total assets, followed by Intel Corporation (INTC) and Micron Technology, Inc. (MU).
Its top 10 holdings account for approximately 62.74% of FTXL's total assets under management.
Performance and Risk
The ETF has added roughly 29.76% and is up about 18.38% so far this year and in the past one year (as of 08/23/2023), respectively. FTXL has traded between $46.03 and $75.36 during this last 52-week period.
The ETF has a beta of 1.28 and standard deviation of 34.87% 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 $8.72 billion in assets, VanEck Semiconductor ETF has $9.65 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
