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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?

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.

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.

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.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix 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 $15.32 billion, making it one of the largest ETFs in the Technology ETFs. This particular fund, before fees and expenses, 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

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.

It's 12-month trailing dividend yield comes in at 0.60%.

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.

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

When you look at individual holdings, Nvidia Corp- (NVDA - Free Report) accounts for about 11.06% of the fund's total assets, followed by Broadcom Inc- (AVGO - Free Report) and Qualcomm Inc- (QCOM - Free Report) .

The top 10 holdings account for about 58.91% of total assets under management.

Performance and Risk

So far this year, SOXX has gained about 26.91%, and it's up approximately 38.33% in the last one year (as of 07/18/2024). During this past 52-week period, the fund has traded between $146.13 and $265.49.

The fund has a beta of 1.33 and standard deviation of 33.80% 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.

First Trust NASDAQ Semiconductor ETF (FTXL - Free Report) tracks Nasdaq US Smart Semiconductor Index and the VanEck Semiconductor ETF (SMH - Free Report) tracks MVIS US Listed Semiconductor 25 Index. First Trust NASDAQ Semiconductor ETF has $1.61 billion in assets, VanEck Semiconductor ETF has $22.43 billion. FTXL has an expense ratio of 0.60% 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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