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

Smart Beta ETF report for XSD

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This story originally appeared on Zacks

A smart beta exchange traded fund, the SPDR S&P Semiconductor ETF (XSD) debuted on 01/31/2006, and offers broad exposure to the Technology ETFs category of the market.

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What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

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.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

Because the fund has amassed over $1.22 billion, this makes it one of the average sized ETFs in the Technology ETFs. XSD is managed by State Street Global Advisors. This particular fund 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.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Operating expenses on an annual basis are 0.35% for XSD, making it one of the least expensive products in the space.

The fund has a 12-month trailing dividend yield of 0.11%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. 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, Advanced Micro Devices Inc. (AMD) accounts for about 2.87% of total assets, followed by Nvidia Corporation (NVDA) and First Solar Inc. (FSLR).

Its top 10 holdings account for approximately 27.62% of XSD's total assets under management.

Performance and Risk

The ETF has gained about 30.43% so far this year and is up roughly 65.21% in the last one year (as of 11/01/2021). In the past 52-week period, it has traded between $132.48 and $221.31.

The ETF has a beta of 1.23 and standard deviation of 36.26% for the trailing three-year period, making it a high risk choice in the space. With about 43 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 Semiconductor ETF (SMH) tracks MVIS US Listed Semiconductor 25 Index and the iShares Semiconductor ETF (SOXX) tracks PHLX SOX Semiconductor Sector Index. VanEck Semiconductor ETF has $6.53 billion in assets, iShares Semiconductor ETF has $7.86 billion. SMH has an expense ratio of 0.35% and SOXX charges 0.43%.

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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SPDR S&P Semiconductor ETF (XSD): ETF Research Reports

 

Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report

 

First Solar, Inc. (FSLR): Free Stock Analysis Report

 

NVIDIA Corporation (NVDA): Free Stock Analysis Report

 

VanEck Semiconductor ETF (SMH): ETF Research Reports

 

iShares Semiconductor ETF (SOXX): ETF Research Reports

 

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