Back to top

Image: Bigstock

Is SPDR S&P Semiconductor ETF (XSD) a Strong ETF Right Now?

Read MoreHide Full Article

Designed to provide broad exposure to the Technology ETFs category of the market, the SPDR S&P Semiconductor ETF (XSD - Free Report) is a smart beta exchange traded fund launched on 01/31/2006.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

A good option for investors who believe in market efficiency, market cap weighted indexes offer 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.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

Managed by State Street Global Advisors, XSD has amassed assets over $1.07 billion, making it one of the larger ETFs in the Technology ETFs. XSD, before fees and expenses, seeks to match the performance of the S&P Semiconductor Select Industry Index.

The S&P Semiconductor Select Industry Index represents the Semiconductor sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Semiconductor Index is a modified equal weight index.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.

The fund has a 12-month trailing dividend yield of 0.14%.

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.

XSD's heaviest allocation is in the Information Technology sector, which is about 100% of the portfolio.

Looking at individual holdings, Micron Technology Inc. (MU - Free Report) accounts for about 3.41% of total assets, followed by Power Integrations Inc. (POWI - Free Report) and Rambus Inc. (RMBS - Free Report) .

XSD's top 10 holdings account for about 31.43% of its total assets under management.

Performance and Risk

The ETF has lost about -31.43% and was up about 4.29% so far this year and in the past one year (as of 05/19/2022), respectively. XSD has traded between $159.20 and $248.86 during this last 52-week period.

The fund has a beta of 1.30 and standard deviation of 39% for the trailing three-year period, which makes XSD a high risk choice in this particular space. With about 42 holdings, it has more concentrated exposure than peers.

Alternatives

SPDR S&P 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.

IShares Semiconductor ETF (SOXX - Free Report) tracks PHLX SOX Semiconductor Sector Index and the VanEck Semiconductor ETF (SMH - Free Report) tracks MVIS US Listed Semiconductor 25 Index. IShares Semiconductor ETF has $7.31 billion in assets, VanEck Semiconductor ETF has $7.86 billion. SOXX has an expense ratio of 0.43% 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.

Published in