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

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Designed to provide broad exposure to the Technology ETFs category of the market, the iShares Semiconductor ETF (SOXX - Free Report) is a smart beta exchange traded fund launched on 07/10/2001.

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.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

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.

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 Blackrock, SOXX has amassed assets over $14.08 billion, making it one of the largest ETFs in the Technology ETFs. This particular fund seeks to match the performance of the PHLX SOX Semiconductor Sector Index before fees and expenses.

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.

Operating expenses on an annual basis are 0.35% for this ETF, which makes it one of the least expensive products in the space.

The fund has a 12-month trailing dividend yield of 0.67%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, 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, Broadcom Inc (AVGO - Free Report) accounts for about 9.80% of the fund's total assets, followed by Nvidia Corp (NVDA - Free Report) and Advanced Micro Devices Inc (AMD - Free Report) .

Its top 10 holdings account for approximately 58.67% of SOXX's total assets under management.

Performance and Risk

The ETF has added roughly 14.78% and was up about 38% so far this year and in the past one year (as of 09/17/2024), respectively. SOXX has traded between $146.13 and $265.49 during this last 52-week period.

SOXX has a beta of 1.33 and standard deviation of 35.73% for the trailing three-year period, which makes the fund a high risk choice in the 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 $1.36 billion in assets, VanEck Semiconductor ETF has $22.34 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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