Is First Trust NASDAQ Semiconductor ETF (FTXL) a Strong ETF Right Now?
The First Trust NASDAQ Semiconductor ETF (FTXL) made its debut on 09/20/2016, and is a smart beta exchange traded fund that provides 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.
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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $1.24 billion, this makes it one of the larger ETFs in the Technology ETFs. FTXL is managed by First Trust Advisors. FTXL 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.
Operating expenses on an annual basis are 0.60% for this ETF, which makes it on par with most peer products in the space.
FTXL's 12-month trailing dividend yield is 0.60%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
FTXL's heaviest allocation is in the Information Technology sector, which is 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 has added roughly 54.26% so far this year and it's up approximately 53.91% in the last one year (as of 01/01/2024). In the past 52-week period, it has traded between $52.87 and $82.60.
The fund has a beta of 1.30 and standard deviation of 34.33% 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 $10.46 billion in assets, VanEck Semiconductor ETF has $11.65 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
