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Is First Trust NYSE Arca Biotechnology ETF (FBT) a Strong ETF Right Now?

Smart Beta ETF report for FBT

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This story originally appeared on Zacks

Launched on 06/19/2006, the First Trust NYSE Arca Biotechnology ETF (FBT) is a smart beta exchange traded fund offering broad exposure to the Health Care ETFs category of the market.

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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.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

The fund is sponsored by First Trust Advisors. It has amassed assets over $1.72 billion, making it one of the larger ETFs in the Health Care ETFs. This particular fund seeks to match the performance of the NYSE Arca Biotechnology Index before fees and expenses.

The NYSE Arca Biotechnology Index is an equal dollar weighted index designed to measure the performance of a cross section of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for FBT are 0.55%, which makes it on par with most peer products in the space.

FBT's 12-month trailing dividend yield is 0%.

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.

Representing 100% of the portfolio, the fund has heaviest allocation to the Healthcare sector.

When you look at individual holdings, Biontech Se (adr) (BNTX) accounts for about 3.57% of the fund's total assets, followed by Moderna, Inc. (MRNA) and Charles River Laboratories International, Inc. (CRL).

Its top 10 holdings account for approximately 34.33% of FBT's total assets under management.

Performance and Risk

So far this year, FBT has lost about -3.17%, and is down about -5.28% in the last one year (as of 12/29/2021). During this past 52-week period, the fund has traded between $153.09 and $184.84.

FBT has a beta of 0.90 and standard deviation of 25.12% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 31 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust NYSE Arca Biotechnology ETF is a reasonable option for investors seeking to outperform the Health Care ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

SPDR S&P Biotech ETF (XBI) tracks S&P Biotechnology Select Industry Index and the iShares Biotechnology ETF (IBB) tracks Nasdaq Biotechnology Index. SPDR S&P Biotech ETF has $7.01 billion in assets, iShares Biotechnology ETF has $9.95 billion. XBI has an expense ratio of 0.35% and IBB charges 0.45%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Health Care 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 NYSE Arca Biotechnology ETF (FBT): ETF Research Reports

 

Charles River Laboratories International, Inc. (CRL): Free Stock Analysis Report

 

Moderna, Inc. (MRNA): Free Stock Analysis Report

 

iShares Biotechnology ETF (IBB): ETF Research Reports

 

SPDR S&P Biotech ETF (XBI): ETF Research Reports

 

BioNTech SE Sponsored ADR (BNTX): Free Stock Analysis Report

 

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