Is SPDR S&P Semiconductor ETF (XSD) a Hot ETF Right Now?

Designed to provide broad exposure to the Technology ETFs category of the U.S. equity market, the SPDR S&P Semiconductor ETF (XSD) is a smart beta exchange traded fund launched on 01/31/2006.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as 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.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

Because the fund has amassed over $308.79 M, this makes it one of the average sized ETFs in the Technology ETFs. XSD is managed by State Street Global Advisors. This particular fund, before fees and expenses, seeks to match the performance of the S&P Semiconductor Select Industry Index.

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.

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.

With the least expensive product in the space, this ETF has annual operating expenses of 0.35%.

It's 12-month trailing dividend yield comes in at 0.61%.

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.

Taking into account individual holdings, Semtech Corporation (SMTC) accounts for about 3.65% of the fund's total assets, followed by Micron Technology Inc. (MU) and Inphi Corporation (IPHI).

XSD's top 10 holdings account for about 32.2% of its total assets under management.

Performance and Risk

XSD has added roughly 0.68% so far this year, and as of 04/11/2018, it's up approximately 18.33% in the last one year. In the past 52-week period, the fund has traded between $57.68 and $76.

The ETF has a beta of 1.26 and standard deviation of 23.16% for the trailing three-year period, making it a high choice in the space. With about 37 holdings, it has more concentrated exposure than peers.

Alternatives

SPDR S&P 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.

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 $1.36 B in assets, iShares PHLX Semiconductor ETF has $1.63 B. SMH has an expense ratio of 0.35% and SOXX charges 0.48%.

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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ISHARS-PHLX SEM (SOXX): ETF Research Reports
 
VANECK-SEMICON (SMH): ETF Research Reports
 
SPDR-SP SEMICON (XSD): ETF Research Reports
 
Semtech Corporation (SMTC) : Free Stock Analysis Report
 
Inphi Corporation (IPHI) : Free Stock Analysis Report
 
Micron Technology, Inc. (MU) : Free Stock Analysis Report
 
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