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Is iShares Semiconductor ETF (SOXX) a Strong ETF Right Now?

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The iShares Semiconductor ETF (SOXX - Free Report) made its debut on 07/10/2001, and is a smart beta exchange traded fund that provides broad exposure to the Technology ETFs category of the market.

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.

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.

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

The fund is managed by Blackrock, and has been able to amass over $9.19 billion, which makes it one of the largest ETFs in the Technology ETFs. Before fees and expenses, this particular fund seeks to match the performance of the PHLX SOX Semiconductor Sector Index.

The PHLX SOX Semiconductor Sector Index measures the performance of U.S. traded securities of companies engaged in the semiconductor business.

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 0.43% for this ETF, which makes it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 0.59%.

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.

This ETF has heaviest allocation in the Information Technology sector - about 100% of the portfolio.

When you look at individual holdings, Nvidia Corp (NVDA - Free Report) accounts for about 8.91% of the fund's total assets, followed by Broadcom Inc (AVGO - Free Report) and Intel Corporation Corp (INTC - Free Report) .

The top 10 holdings account for about 55.95% of total assets under management.

Performance and Risk

Year-to-date, the iShares Semiconductor ETF return is roughly 43.05% so far, and was up about 54.98% over the last 12 months (as of 11/22/2021). SOXX has traded between $352.32 and $537.71 in this past 52-week period.

The fund has a beta of 1.16 and standard deviation of 35.02% for the trailing three-year period, which makes SOXX a high risk choice in this particular space. With about 35 holdings, it has more concentrated exposure than peers.

Alternatives

IShares 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.

SPDR S&P Semiconductor ETF (XSD - Free Report) tracks S&P Semiconductor Select Industry Index and the VanEck Semiconductor ETF (SMH - Free Report) tracks MVIS US Listed Semiconductor 25 Index. SPDR S&P Semiconductor ETF has $1.50 billion in assets, VanEck Semiconductor ETF has $7.02 billion. XSD has an expense ratio of 0.35% and SMH charges 0.35%.

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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