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Should You Invest in the SPDR SP Semiconductor ETF (XSD)?

Zacks Equity Research
·4 min read

If you're interested in broad exposure to the Technology - Semiconductors segment of the equity market, look no further than the SPDR SP Semiconductor ETF (XSD), a passively managed exchange traded fund launched on 01/31/2006.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Semiconductors is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 9, placing it in bottom 44%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $639.47 million, making it one of the average sized ETFs attempting to match the performance of the Technology - Semiconductors segment of the equity market. XSD seeks to match the performance of the S&P Semiconductor Select Industry Index before fees and expenses.

The S&P Semiconductor Select Industry Index represents the Semiconductor sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Semiconductor Index is a modified equal weight index.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 0.33%.

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 Information Technology sector--about 100% of the portfolio.

Looking at individual holdings, Sunpower Corporation (SPWR) accounts for about 3.65% of total assets, followed by Cirrus Logic Inc. (CRUS) and Monolithic Power Systems Inc. (MPWR).

The top 10 holdings account for about 31.68% of total assets under management.

Performance and Risk

The ETF has added roughly 40.11% and was up about 52.22% so far this year and in the past one year (as of 11/08/2020), respectively. XSD has traded between $71.11 and $148.03 during this last 52-week period.

The ETF has a beta of 1.29 and standard deviation of 34.48% for the trailing three-year period, making it a high risk choice in the space. With about 39 holdings, it has more concentrated exposure than peers.

Alternatives

SPDR SP Semiconductor ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XSD is a great option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

VanEck Vectors Semiconductor ETF (SMH) tracks MVIS US Listed Semiconductor 25 Index and the iShares PHLX Semiconductor ETF (SOXX) tracks PHLX SOX Semiconductor Sector Index. VanEck Vectors Semiconductor ETF has $3.21 billion in assets, iShares PHLX Semiconductor ETF has $4.05 billion. SMH has an expense ratio of 0.35% and SOXX charges 0.46%.

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
 
SPDR SP Semiconductor ETF (XSD): ETF Research Reports
 
SunPower Corporation (SPWR) : Free Stock Analysis Report
 
Monolithic Power Systems, Inc. (MPWR) : Free Stock Analysis Report
 
Cirrus Logic, Inc. (CRUS) : Free Stock Analysis Report
 
iShares PHLX Semiconductor ETF (SOXX): ETF Research Reports
 
VanEck Vectors Semiconductor ETF (SMH): ETF Research Reports
 
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Zacks Investment Research