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Should You Invest in the First Trust NASDAQ Transportation ETF (FTXR)?

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Designed to provide broad exposure to the Industrials - Transportation/Shipping segment of the equity market, the First Trust NASDAQ Transportation ETF (FTXR - Free Report) is a passively managed exchange traded fund launched on 09/20/2016.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Industrials - Transportation/Shipping is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 4, placing it in top 25%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $203.31 million, making it one of the average sized ETFs attempting to match the performance of the Industrials - Transportation/Shipping segment of the equity market. FTXR seeks to match the performance of the Nasdaq US Smart Transportation Index before fees and expenses.

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

Costs

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.

Annual operating expenses for this ETF are 0.60%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.45%.

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 Industrials sector--about 75% of the portfolio, followed by Consumer Discretionary.

Looking at individual holdings, Union Pacific Corporation (UNP - Free Report) accounts for about 8.47% of total assets, followed by J.b. Hunt Transport Services, Inc. (JBHT - Free Report) and Csx Corporation (CSX - Free Report) .

The top 10 holdings account for about 59.96% of total assets under management.

Performance and Risk

So far this year, FTXR has lost about -14.25%, and is down about -10.09% in the last one year (as of 04/26/2022). During this past 52-week period, the fund has traded between $29.06 and $35.96.

The ETF has a beta of 1.36 and standard deviation of 31.14% for the trailing three-year period. With about 31 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust NASDAQ Transportation ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FTXR is an excellent option for investors seeking exposure to the Industrials ETFs segment of the market. There are other additional ETFs in the space that 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 $1.19 billion in assets, U.S. Global Jets ETF has $3.53 billion. IYT has an expense ratio of 0.41% and JETS charges 0.60%.

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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