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Is First Trust NASDAQ Transportation ETF (FTXR) a Strong ETF Right Now?

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Designed to provide broad exposure to the Industrials ETFs category of the market, the First Trust NASDAQ Transportation ETF (FTXR - Free Report) is a smart beta exchange traded fund launched on 09/20/2016.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

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

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

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.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

The fund is sponsored by First Trust Advisors. It has amassed assets over $1.23 billion, making it one of the average sized ETFs in the Industrials ETFs. This particular fund, before fees and expenses, seeks to match the performance of the Nasdaq US Smart Transportation Index.

The Nasdaq US Smart Transportation Index is a modified factor weighted index, designed to provide exposure to US companies within the transportation industry.

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 0.60% for FTXR, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.80%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

For FTXR, it has heaviest allocation in the Industrials sector --about 78.90% of the portfolio --while Consumer Discretionary and Energy round out the top three.

Taking into account individual holdings, Expeditors International Of Washington, Inc. (EXPD - Free Report) accounts for about 7.43% of the fund's total assets, followed by Old Dominion Freight Line, Inc. (ODFL - Free Report) and Ford Motor Company (F - Free Report) .

Its top 10 holdings account for approximately 55.03% of FTXR's total assets under management.

Performance and Risk

So far this year, FTXR has gained about 24.95%, and is up about 22.69% in the last one year (as of 12/24/2021). During this past 52-week period, the fund has traded between $27.55 and $35.96.

The ETF has a beta of 1.38 and standard deviation of 30.33% for the trailing three-year period. With about 30 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust NASDAQ Transportation ETF is an excellent option for investors seeking to outperform the Industrials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.

IShares U.S. Transportation ETF (IYT - Free Report) tracks Dow Jones Transportation Average Index and the U.S. Global Jets ETF (JETS - Free Report) tracks U.S. Global Jets Index. IShares U.S. Transportation ETF has $1.79 billion in assets, U.S. Global Jets ETF has $3.27 billion. IYT has an expense ratio of 0.41% and JETS charges 0.60%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Industrials 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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