A Balanced Approach in a Growing Industry
XSD distinguishes itself from its peers by employing a modified equal-weighted index strategy. This approach ensures a balanced representation across various market capitalizations within the industry. The ETF’s portfolio is composed of 40 stocks, with the top 10 holdings making up only 32.7% of its assets. This contrasts sharply with other prominent semiconductor firms, which tend to have a more concentrated allocation in their top holdings. For example, Nvidia (NASDAQ:NVDA), a major industry player, comprises a significant portion of the VanEck Semiconductor ETF (NASDAQ:SMH) assets, while it represents a mere 3.9% of XSD’s fund. Consequently, the performance of a single entity such as Nvidia has a more moderate effect on XSD’s overall results.
The companies in XSD’s portfolio vary not only in size, but also in their market performance. Eight of the top 10 holdings have Smart Scores of 8 or higher, indicating a robust potential for market outperformance. Among them, Marvell Technology (NASDAQ:MRVL) and other notable companies have achieved “Perfect 10” Smart Scores, indicating their strong market positions.
A review of XSD’s performance reveals a nuanced picture. Over the past three years, the ETF has generated an annual return of 5.8%, which may seem modest. Extending the view to a longer time frame, XSD has generated impressive annual returns of 24.5% over the past five years and 22.0% over the past decade. These numbers dwarf the performance of both the S&P 500 and the Nasdaq over similar time periods, with the Vanguard S&P 500 ETF (NYSEARCA:VOO) and the Invesco QQQ Trust (NASDAQ:QQQ) trailing XSD’s five- and ten-year returns. The semiconductor industry’s significant growth is fueled by escalating demand in various sectors, including automotive, data centers and consumer electronics. This expansion is reflected in the performance of funds like XSD that offer exposure to a broad range of companies within the sector.
The SPDR S&P Semiconductor ETF has proven itself over the long term, backed by a diversified and balanced portfolio. Its modified equal-weight strategy across large-, mid- and small-cap stocks provides a comprehensive view of the semiconductor industry’s performance. The Fund’s historical performance and strategic portfolio composition underscore its integral role in the semiconductor space and provide a broad industry perspective.
Source link
