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Is iShares Semiconductor ETF (SOXX) a Strong ETF Right Now?

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Making its debut on 07/10/2001, smart beta exchange traded fund iShares Semiconductor ETF (SOXX - Free Report) provides investors broad exposure to the Technology ETFs category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

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.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as 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.

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

Managed by Blackrock, SOXX has amassed assets over $7.63 billion, making it one of the largest ETFs in the Technology ETFs. Before fees and expenses, this particular fund seeks to match the performance of the PHLX SOX Semiconductor Sector Index.

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

Cost & Other Expenses

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.43%, making it one of the cheaper products in the space.

SOXX's 12-month trailing dividend yield is 0.80%.

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.

This ETF has heaviest allocation in the Information Technology sector - about 100% of the portfolio.

Looking at individual holdings, Broadcom Inc (AVGO - Free Report) accounts for about 9.48% of total assets, followed by Advanced Micro Devices Inc (AMD - Free Report) and Qualcomm Inc (QCOM - Free Report) .

The top 10 holdings account for about 60.09% of total assets under management.

Performance and Risk

The ETF has lost about -22.80% and is down about -0.69% so far this year and in the past one year (as of 06/01/2022), respectively. SOXX has traded between $385.37 and $555.63 during this last 52-week period.

The fund has a beta of 1.20 and standard deviation of 37.43% 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 $1.15 billion in assets, VanEck Semiconductor ETF has $8.43 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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