ETF Exchange Traded Funds
Semiconductor Companies Strong Quarterly Earnings
Semiconductor ETFs Charged Up on Strong Q3 Earnings by Zacks Investment Research
Semiconductors have enjoyed a strong rally this year on encouraging industry fundamentals as well as investors’ continued acclaim for value-centric traditional stocks. This trend is likely to continue in the coming months on a string of earnings and revenue beats that trumped the worst sell-off seen early in the month after the diversified chipmaker Microchip Technology (MCHP) warned of frailty in the broad-based semiconductor industry.
This is especially true as industry primes such as Micron Technology (MU), Intel (INTC), Broadcom (BRCM) and Texas Instruments (TXN) reported strongly and guided higher, easing the concerns of an industry downturn. In addition, the industry has a solid Zacks Industry Rank at the time of writing, suggesting smooth trading for the space over the coming months.
Semiconductor Earnings in Focus
The memory chipmaker, MU, has been the major gainer in the industry as the stock climbed nearly 10% to hit a 52-week high of $34.85 in just two days after it reported fourth-quarter fiscal 2014 earnings on September 25 after the market closed. This is primarily thanks to an encouraging revenue guidance of $4.45–$4.70 billion for the first quarter of fiscal 2015; the mid-point of which was well above the Zacks Consensus Estimate of $4.48 billion at the time of issuing the guidance.
Though earnings per share of 82 cents came in line with the Zacks Consensus Estimate, revenues of $4.23 billion outpaced our estimate by $4.17 billion. The shares are nevertheless down 2% since the earnings announcement.
Intel, the world’s largest chipmaker, has gained nearly 3% since its third-quarter earnings announcement on October 14 after the closing bell. The company topped the Zacks Consensus Estimate by a penny on earnings and $0.17 billion on revenues thanks to a stabilizing PC market and improving data center business. Further, the company projects revenues in the range of $14.2–$15.2 billion, the mid-point of which is in line with our current estimate.
TXN reported earnings of 76 cents surpassing our estimate by a nickel. Revenues of $3.50 billion were also above the Zacks Consensus Estimate of $3.46. Additionally, the company provided an upbeat guidance for the fourth quarter. Earnings per share are expected in the range of 64–74 cents, well above the Zacks Consensus Estimate of 62 cents at the time of issuing the guidance while revenues will likely be between $3.13 billion and $3.39 billion. The stock is up 7.1% post earnings announcement on October 20 after the bell.
Broadcom also surprised the market in its latest earnings release on October 21 after the bell. Earnings per share came in at 76 cents on $2.26 billion revenues, strongly outpacing our earnings estimate of 66 cents and revenue estimate of $2.17 billion. The company guided higher with revenue of $2–$2.15 billion for the fourth quarter of 2014 while the current Zacks Consensus Estimate is currently pegged at $2.086 billion. BRCM shares rose 6.3% post earnings to date.
ETFs in Focus
The impressive performances and bright industry outlook put semiconductor ETFs in focus for the next few days. Investors seeking to ride out the surging space in a diversified way could consider the following ETFs.
iShares PHLX Semiconductor ETF (SOXX)
This ETF follows the PHLX Semiconductor Sector Index and offers exposure to 16 domestic firms. It is highly concentrated on the top three firms with heavy allocations to TXN, MU and Applied Materials (AMAT) that make up for a combined 22% share. Broadcom takes the fourth position in the basket with 4.25% allocation. Further, about two-thirds of the portfolio is dominated by large cap stocks while mid caps take the remainder with just 4% going to small caps.
The fund has amassed $499 million in its asset base and trades in average volume of roughly 219,000 shares a day. The product charges 47 bps in fees a year from investors and has gained about 11.8% over the past 10 days. The fund has a Zacks Rank of 3 or ‘Hold’ rating with Medium risk outlook.
Market Vectors Semiconductor ETF (SMH)
This fund provides exposure to 26 securities by tracking the Market Vectors US Listed Semiconductor 25 Index. Of these, two firms – Intel and Taiwan Semiconductor Manufacturing (TSM) – dominate the fund’s return with a combined 34.7% of total assets. MU, TXN and BRCM are among the fund’s top six holdings making up for 5.41%, 5.04% and 4.54%, respectively.
From a market cap look, the product focuses on large cap stocks, as these account for three-fourth of the portfolio. The product has managed assets worth $306.5 million and charges 35 bps in annual fees and expenses. It is heavily traded with a volume of more than 2.2 million shares per day and has gained about 10% in the past 10 days. SMH has a Zacks ETF Rank of 2 or ‘Buy’ rating with Medium risk outlook.
SPDR S&P Semiconductor ETF (XSD)
This fund tracks the S&P Semiconductor Select Industry Index, holding 49 stocks in its portfolio. It is widely spread across each security as none of these allocates more than 2.7% of the assets. The product has a definite tilt toward small cap stocks at 61%, followed by 26% in mid caps and 13% in large caps.
The fund is less popular and illiquid with AUM of $129 million and average daily volume of roughly 114,000 shares. It charges 35 bps in fees per year and has added nearly 10.7% over the past 10 trading sessions. The fund has a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook.
PowerShares Dynamic Semiconductors Fund (PSI)
This fund tracks the Dynamic Semiconductor Intellidex Index, holding 30 securities in the basket with none holding more than 5.7% of assets. The in-focus four firms are among the top 10 holdings. The ETF is widely diversified across various market spectrums as about 44% goes to small caps, 31% to large caps and the rest to mid caps.
The product, with AUM of $28.2 million is often overlooked by investors and hence sees a lower average daily volume of 19,000 shares. Expense ratio came in at 0.63%. PSI is up nearly 11.6% in the same time period and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook (read: 3 Overlooked Funds Beating the SPDR Tech ETF (XLK) This Year).
These products could make compelling investments given their robust earnings growth and solid industry trends like an improving PC market and rising global industry sales. Further, these are clearly outpacing the broad tech fund (XLK) and broad market fund (SPY) by wide margins over the past 10 days, suggesting continued outperformance in the coming months.
Click Here for a Free Trial of Zacks Investment Research
Click the Links Below to Review ETF Exchange Traded Fund Trade Alert Software and Advisory Services
Free Trial Zacks ETF Rank
Our Zacks ETF Ranking system was designed specifically for Exchange-Traded Funds in order to help you pick the best product for your investing needs. Not only does this system take into account asset class forecasts, but it looks at several ETF specific factors, such as expense ratios and bid-ask spreads, to give investors a comprehensive account of a funds investment profile. This Ranking method is built for a one year outlook and seeks to find ETFs that are likely to outperform. The funds are ranked on the traditional Zacks Rank scale of #1 (Strong Buy) to #5 (Strong Sell), and we currently evaluate a variety of funds across asset classes including equities, commodities, fixed income and currency.
ETF, Exchange Traded Funds Research, ETF Investing
ETF Screener with Lowest Price-to-Fair Value, Most Heavily Traded, and YTD Top Performers. ETF Tools with ETF Performance Table, ETF Analyst Picks, ETF Valuation Quickrank, Cost Analyzer ETF, and ETF Analyst Reports. ETF Discussion Boards and Free ETF Newsletter.
Portfolio Prophet Exchange Traded Funds Trade Alert Software
The Portfolio Prophet is our premium trade alert software for quickly & easily adding Exchange Traded Funds (ETFs) to your trading portfolio. The Portfolio Prophet alerts you whenever a new trade is setting up; then, it follows the trade to completion, so you'll know exactly when to change your stop orders which "lock in" profit. You can even customize it based on your risk tolerance - aggressive, moderate, or conservative.
Feel the Power of TD Ameritrade and Trade Free for 60 Days
Committed to providing one of the highest levels of service since 1975. For over 35 years we’ve prided ourselves on providing our clients with industry leading customer service and resources.
Three Reasons to Choose TD Ameritrade for ETF Trading
1. Over 100+ Commission-free ETFs - We offer a curated selection of commission-free ETFs selected by Morningstar Associates.
2. ETF Knowledge Center - Leverage the ETF Knowledge Center and arm yourself with greater information and education on ETFs. Explore video tutorials, articles, and announcements on a range of topics, from ETF basics to in-depth subjects like accessing commodities, risks associated with leveraging, and measuring ETF liquidity.
3. Powerful Trading Platforms - Trade Architect® and thinkorswim® help you to seize opportunities with real-time ETF quotes, market insight and streaming news to give you new trading ideas.
What Is An Exchange Traded Fund?
An exchange-traded fund or ETF is an investment vehicle traded on stock exchanges, much like stocks or bonds. An ETF holds assets such as stocks, bonds, or futures. Institutional investors can redeem large blocks of shares of the ETF (known as "creation units") for a "basket" of the underlying assets or, alternately, exchange the underlying assets for creation units. This creation and redemption of shares enables institutions to engage in arbitrage and causes the value of the ETF to approximate the net asset value of the underlying assets. Most ETFs track an index, such as the Dow Jones Industrial Average or the S&P 500.
An ETF is Like a Mutual Fund and a Closed End Fund
An ETF combines the valuation feature of a mutual fund or unit investment trust, which can be purchased or redeemed at the end of each trading day for its net asset value, with the tradability feature of a closed-end fund, which trades throughout the trading day at prices that may be substantially more or less than its net asset value. Closed-end funds are not considered to be exchange-traded funds, even though they are funds and are traded on an exchange. ETFs have been available in the US since 1993 and in Europe since 1999. ETFs traditionally have been index funds, but in 2008 the U.S. Securities and Exchange Commission began to authorize the creation of actively-managed ETFs.
Stock Option Forex Futures Training Seminars Webinars Workshops
Click Here For The Complete 2014 Schedule
Professional investors traders teaching successful low-risk high-reward
trade strategies. Power profit secrets for stocks, options, forex, futures
investing trading success. Or avail of Home Study Courses and or
Trading Softwares available to improve your investment returns.