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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?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

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.

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.

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.

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

The fund is managed by Blackrock. SOXX has been able to amass assets over $7.19 billion, making it one of the largest ETFs in the Technology ETFs. SOXX seeks to match the performance of the PHLX SOX Semiconductor Sector Index before fees and expenses.

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

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.

With one of the cheaper products in the space, this ETF has annual operating expenses of 0.43%.

It has a 12-month trailing dividend yield of 0.87%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

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

Looking at individual holdings, Nvidia Corp (NVDA - Free Report) accounts for about 8.36% of total assets, followed by Broadcom Inc (AVGO - Free Report) and Intel Corporation Corp (INTC - Free Report) .

Its top 10 holdings account for approximately 56.72% of SOXX's total assets under management.

Performance and Risk

So far this year, SOXX has lost about -26.08%, and is down about -9.31% in the last one year (as of 08/01/2022). During this past 52-week period, the fund has traded between $337.24 and $555.63.

The fund has a beta of 1.25 and standard deviation of 38.13% 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 $1.12 billion in assets, VanEck Semiconductor ETF has $7.43 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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