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Is First Trust NYSE Arca Biotechnology ETF (FBT) a Strong ETF Right Now?
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Launched on 06/19/2006, the First Trust NYSE Arca Biotechnology ETF (FBT - Free Report) is a smart beta exchange traded fund offering broad exposure to the Health Care ETFs category of the market.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination 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
The fund is managed by First Trust Advisors, and has been able to amass over $1.37 billion, which makes it one of the larger ETFs in the Health Care ETFs. This particular fund, before fees and expenses, seeks to match the performance of the NYSE Arca Biotechnology Index.
The NYSE Arca Biotechnology Index is an equal dollar weighted index designed to measure the performance of a cross section of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services.
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.
Annual operating expenses for FBT are 0.55%, which makes it on par with most peer products in the space.
FBT's 12-month trailing dividend yield is 1.51%.
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.
FBT's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
When you look at individual holdings, Alnylam Pharmaceuticals, Inc. (ALNY - Free Report) accounts for about 4.95% of the fund's total assets, followed by Sarepta Therapeutics, Inc. (SRPT - Free Report) and Agios Pharmaceuticals, Inc. (AGIO - Free Report) .
The top 10 holdings account for about 38.12% of total assets under management.
Performance and Risk
Year-to-date, the First Trust NYSE Arca Biotechnology ETF has lost about -9.90% so far, and is down about -9.09% over the last 12 months (as of 11/09/2022). FBT has traded between $123.32 and $165.93 in this past 52-week period.
The fund has a beta of 0.81 and standard deviation of 27.13% for the trailing three-year period, which makes FBT a high risk choice in this particular space. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust NYSE Arca Biotechnology ETF is an excellent option for investors seeking to outperform the Health Care ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
SPDR S&P Biotech ETF (XBI - Free Report) tracks S&P Biotechnology Select Industry Index and the iShares Biotechnology ETF (IBB - Free Report) tracks Nasdaq Biotechnology Index. SPDR S&P Biotech ETF has $7.22 billion in assets, iShares Biotechnology ETF has $8.43 billion. XBI has an expense ratio of 0.35% and IBB charges 0.44%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Health Care 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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Is First Trust NYSE Arca Biotechnology ETF (FBT) a Strong ETF Right Now?
Launched on 06/19/2006, the First Trust NYSE Arca Biotechnology ETF (FBT - Free Report) is a smart beta exchange traded fund offering broad exposure to the Health Care ETFs category of the market.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination 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
The fund is managed by First Trust Advisors, and has been able to amass over $1.37 billion, which makes it one of the larger ETFs in the Health Care ETFs. This particular fund, before fees and expenses, seeks to match the performance of the NYSE Arca Biotechnology Index.
The NYSE Arca Biotechnology Index is an equal dollar weighted index designed to measure the performance of a cross section of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services.
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.
Annual operating expenses for FBT are 0.55%, which makes it on par with most peer products in the space.
FBT's 12-month trailing dividend yield is 1.51%.
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.
FBT's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
When you look at individual holdings, Alnylam Pharmaceuticals, Inc. (ALNY - Free Report) accounts for about 4.95% of the fund's total assets, followed by Sarepta Therapeutics, Inc. (SRPT - Free Report) and Agios Pharmaceuticals, Inc. (AGIO - Free Report) .
The top 10 holdings account for about 38.12% of total assets under management.
Performance and Risk
Year-to-date, the First Trust NYSE Arca Biotechnology ETF has lost about -9.90% so far, and is down about -9.09% over the last 12 months (as of 11/09/2022). FBT has traded between $123.32 and $165.93 in this past 52-week period.
The fund has a beta of 0.81 and standard deviation of 27.13% for the trailing three-year period, which makes FBT a high risk choice in this particular space. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust NYSE Arca Biotechnology ETF is an excellent option for investors seeking to outperform the Health Care ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
SPDR S&P Biotech ETF (XBI - Free Report) tracks S&P Biotechnology Select Industry Index and the iShares Biotechnology ETF (IBB - Free Report) tracks Nasdaq Biotechnology Index. SPDR S&P Biotech ETF has $7.22 billion in assets, iShares Biotechnology ETF has $8.43 billion. XBI has an expense ratio of 0.35% and IBB charges 0.44%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Health Care 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.