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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?

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.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

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

Because the fund has amassed over $1.14 billion, this makes it one of the average sized ETFs in the Industrials ETFs. FTXR is managed by First Trust Advisors. Before fees and expenses, FTXR 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

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 on par with most peer products in the space, this ETF has annual operating expenses of 0.60%.

FTXR's 12-month trailing dividend yield is 0.62%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

For FTXR, it has heaviest allocation in the Industrials sector --about 80% 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 8.48% of the fund's total assets, followed by Blink Charging Co. (BLNK - Free Report) and Csx Corporation (CSX - Free Report) .

Its top 10 holdings account for approximately 56.7% of FTXR's total assets under management.

Performance and Risk

The ETF has added about 18.62% and is up roughly 31.57% so far this year and in the past one year (as of 10/18/2021), respectively. FTXR has traded between $23.32 and $35.12 during this last 52-week period.

FTXR has a beta of 1.39 and standard deviation of 30.37% 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 $1.63 billion in assets, U.S. Global Jets ETF has $3.71 billion. IYT has an expense ratio of 0.42% 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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