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Is First Trust NASDAQ Bank ETF (FTXO) a Strong ETF Right Now?

Designed to provide broad exposure to the Financials ETFs category of the market, the First Trust NASDAQ Bank ETF (FTXO) is a smart beta exchange traded fund launched on 09/20/2016.

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.

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.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other 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 First Trust Advisors, FTXO has amassed assets over $290.89 million, making it one of the average sized ETFs in the Financials ETFs. Before fees and expenses, FTXO seeks to match the performance of the Nasdaq US Smart Banks Index.

The Nasdaq US Smart Banks Index is a modified factor weighted index, designed to provide exposure to US companies within the banking industry.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

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

It has a 12-month trailing dividend yield of 1.53%.

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.

For FTXO, it has heaviest allocation in the Financials sector --about 100% of the portfolio.

Taking into account individual holdings, New York Community Bancorp, Inc. (NYCB) accounts for about 8.24% of the fund's total assets, followed by The Pnc Financial Services Group, Inc. (PNC) and Popular, Inc. (BPOP).

FTXO's top 10 holdings account for about 58.96% of its total assets under management.

Performance and Risk

The ETF has added about 47.67% so far this year and it's up approximately 59.12% in the last one year (as of 11/18/2021). In the past 52-week period, it has traded between $21.69 and $35.32.

The ETF has a beta of 1.36 and standard deviation of 38.92% for the trailing three-year period. With about 30 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust NASDAQ Bank ETF is a reasonable option for investors seeking to outperform the Financials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

Invesco KBW Bank ETF (KBWB) tracks KBW Nasdaq Bank index and the SPDR S&P Bank ETF (KBE) tracks S&P Banks Select Industry Index. Invesco KBW Bank ETF has $3.01 billion in assets, SPDR S&P Bank ETF has $3.48 billion. KBWB has an expense ratio of 0.35% and KBE 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 Financials 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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First Trust NASDAQ Bank ETF (FTXO): ETF Research Reports
 
The PNC Financial Services Group, Inc (PNC): Free Stock Analysis Report
 
Popular, Inc. (BPOP): Free Stock Analysis Report
 
New York Community Bancorp, Inc. (NYCB): Free Stock Analysis Report
 
SPDR S&P Bank ETF (KBE): ETF Research Reports
 
Invesco KBW Bank ETF (KBWB): ETF Research Reports
 
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