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Is First Trust NYSE Arca Biotechnology ETF (FBT) a Strong ETF Right Now?
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Designed to provide broad exposure to the Health Care ETFs category of the market, the First Trust NYSE Arca Biotechnology ETF (FBT - Free Report) is a smart beta exchange traded fund launched on 06/19/2006.
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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
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
Because the fund has amassed over $1.79 billion, this makes it one of the larger ETFs in the Health Care ETFs. FBT is managed by First Trust Advisors. FBT 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.55% for FBT, making 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.
For FBT, it has heaviest allocation in the Healthcare sector --about 100% of the portfolio.
Taking into account individual holdings, Biontech Se (adr) (BNTX - Free Report) accounts for about 3.57% of the fund's total assets, followed by Moderna, Inc. (MRNA - Free Report) and Charles River Laboratories International, Inc. (CRL - Free Report) .
FBT's top 10 holdings account for about 34.33% of its total assets under management.
Performance and Risk
The ETF has lost about -2.38% so far this year and is up roughly 4.18% in the last one year (as of 10/25/2021). In the past 52-week period, it has traded between $152.75 and $184.84.
FBT has a beta of 0.96 and standard deviation of 26.39% 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 - Free Report) tracks S&P Biotechnology Select Industry Index and the iShares Biotechnology ETF (IBB - Free Report) tracks Nasdaq Biotechnology Index. SPDR S&P Biotech ETF has $6.78 billion in assets, iShares Biotechnology ETF has $10.16 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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Is First Trust NYSE Arca Biotechnology ETF (FBT) a Strong ETF Right Now?
Designed to provide broad exposure to the Health Care ETFs category of the market, the First Trust NYSE Arca Biotechnology ETF (FBT - Free Report) is a smart beta exchange traded fund launched on 06/19/2006.
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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
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
Because the fund has amassed over $1.79 billion, this makes it one of the larger ETFs in the Health Care ETFs. FBT is managed by First Trust Advisors. FBT 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.55% for FBT, making 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.
For FBT, it has heaviest allocation in the Healthcare sector --about 100% of the portfolio.
Taking into account individual holdings, Biontech Se (adr) (BNTX - Free Report) accounts for about 3.57% of the fund's total assets, followed by Moderna, Inc. (MRNA - Free Report) and Charles River Laboratories International, Inc. (CRL - Free Report) .
FBT's top 10 holdings account for about 34.33% of its total assets under management.
Performance and Risk
The ETF has lost about -2.38% so far this year and is up roughly 4.18% in the last one year (as of 10/25/2021). In the past 52-week period, it has traded between $152.75 and $184.84.
FBT has a beta of 0.96 and standard deviation of 26.39% 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 - Free Report) tracks S&P Biotechnology Select Industry Index and the iShares Biotechnology ETF (IBB - Free Report) tracks Nasdaq Biotechnology Index. SPDR S&P Biotech ETF has $6.78 billion in assets, iShares Biotechnology ETF has $10.16 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.