Should You Invest in the First Trust NASDAQ Transportation ETF (FTXR)?

Zacks Equity Research

Designed to provide broad exposure to the Industrials - Transportation/Shipping segment of the equity market, the First Trust NASDAQ Transportation ETF (FTXR) is a passively managed exchange traded fund launched on 09/20/2016.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Industrials - Transportation/Shipping is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 14, placing it in bottom 13%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $822.21 million, making it one of the average sized ETFs attempting to match the performance of the Industrials - Transportation/Shipping segment of the equity market. FTXR seeks to match the performance of the Nasdaq US Smart Transportation Index before fees and expenses.

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

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.60%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.32%.

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 Industrials sector--about 51.10% of the portfolio, followed by Consumer Discretionary.

Looking at individual holdings, Tesla, Inc. (TSLA) accounts for about 10.75% of total assets, followed by General Motors Company (GM) and Ford Motor Company (F).

The top 10 holdings account for about 62.26% of total assets under management.

Performance and Risk

The ETF has added roughly 3.27% and it's up approximately 13.71% so far this year and in the past one year (as of 02/01/2021), respectively. FTXR has traded between $12.80 and $30.75 during this last 52-week period.

The ETF has a beta of 1.44 and standard deviation of 30.25% for the trailing three-year period. With about 31 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust NASDAQ Transportation ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FTXR is an excellent option for investors seeking exposure to the Industrials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

IShares Transportation Average ETF (IYT) tracks Dow Jones Transportation Average Index and the U.S. Global Jets ETF (JETS) tracks U.S. Global Jets Index. IShares Transportation Average ETF has $1.56 billion in assets, U.S. Global Jets ETF has $2.88 billion. IYT has an expense ratio of 0.42% and JETS charges 0.60%.

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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