U.S. Markets closed

Should You Invest in the First Trust NASDAQ ABA Community Bank Index Fund (QABA)?

Zacks Equity Research
Cadence Design Systems (CDNS) closed the most recent trading day at $67.72, moving -0.56% from the previous trading session.

If you're interested in broad exposure to the Financials - Community Banks segment of the equity market, look no further than the First Trust NASDAQ ABA Community Bank Index Fund (QABA), a passively managed exchange traded fund launched on 06/29/2009.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials - Community Banks is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 10, placing it in bottom 38%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $234.89 M, making it one of the average sized ETFs attempting to match the performance of the Financials - Community Banks segment of the equity market. QABA seeks to match the performance of the NASDAQ OMX ABA Community Bank Index before fees and expenses.

The NASDAQ OMX ABA Community Bank Index is a market capitalization-weighted index. The Index includes a subset of banks and thrifts or their holding companies listed on NASDAQ.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.60%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.79%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Financials sector--about 99.60% of the portfolio.

Looking at individual holdings, Commerce Bancshares, Inc. (CBSH) accounts for about 2.93% of total assets, followed by East West Bancorp, Inc. (EWBC) and Bok Financial Corporation (BOKF).

The top 10 holdings account for about 21.37% of total assets under management.

Performance and Risk

The ETF has added roughly 5.87% and is down about -12.12% so far this year and in the past one year (as of 01/09/2019), respectively. QABA has traded between $41.05 and $58.34 during this last 52-week period.

The ETF has a beta of 1.05 and standard deviation of 20.47% for the trailing three-year period, making it a high risk choice in the space. With about 164 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust NASDAQ ABA Community Bank Index Fund carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, QABA is a good option for those seeking exposure to the Financials ETFs area of the market. Investors might also want to consider some other ETF options in the space.


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
 
FT-NDQ ABA CBIF (QABA): ETF Research Reports
 
Commerce Bancshares, Inc. (CBSH) : Free Stock Analysis Report
 
BOK Financial Corporation (BOKF) : Free Stock Analysis Report
 
East West Bancorp, Inc. (EWBC) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research