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

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Launched on 01/31/2006, the SPDR S&P Semiconductor ETF (XSD - Free Report) is a smart beta exchange traded fund offering 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.

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.

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.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

Managed by State Street Global Advisors, XSD has amassed assets over $1.24 billion, making it one of the larger ETFs in the Technology ETFs. Before fees and expenses, this particular fund 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

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.

Operating expenses on an annual basis are 0.35% for XSD, making it one of the least expensive products in the space.

XSD's 12-month trailing dividend yield is 0.40%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Representing 100% of the portfolio, the fund has heaviest allocation to the Information Technology sector.

Taking into account individual holdings, Synaptics Inc (SYNA - Free Report) accounts for about 3.23% of the fund's total assets, followed by Rambus Inc (RMBS - Free Report) and Broadcom Inc (AVGO - Free Report) .

The top 10 holdings account for about 30.02% of total assets under management.

Performance and Risk

So far this year, XSD has gained about 7.16%, and is up about 17.50% in the last one year (as of 10/25/2023). During this past 52-week period, the fund has traded between $153.51 and $231.97.

The ETF has a beta of 1.40 and standard deviation of 36.66% for the trailing three-year period, making it a high risk choice in the space. With about 40 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 $8.57 billion in assets, VanEck Semiconductor ETF has $9.27 billion. SOXX 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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