Differences In Top Holdings
5G is still an emerging industry, so given the narrowness of the theme, it's not surprising that there's some commonality in holdings between FIVG and NXTG—32 names, as of July 30.
However, in terms of weighting, only 29% of the ETFs' holdings actually overlap. That's largely because of how stocks are assigned individual tiers within each fund, meaning that what might be a significant holding in one ETF has a reduced weighting in the other, or maybe doesn't appear at all:
|Top 10 Holdings In 5G ETFs|
|Skyworks Solutions, Inc.||5.49%||Win Semiconductors Corp.||2.13%|
|Analog Devices, Inc.||5.39%||Micron Technology, Inc.||2.09%|
|Marvell Technology Group Ltd.||5.17%||Lumentum Holdings, Inc.||1.86%|
|Nokia Oyj Sponsored ADR||5.12%||Semtech Corporation||1.82%|
|Xilinx, Inc.||5.05%||Skyworks Solutions, Inc.||1.76%|
|Telefonaktiebolaget LM Ericsson Sponsored ADR Class B||4.33%||Qorvo, Inc.||1.76%|
|AT&T Inc.||3.00%||STMicroelectronics NV||1.72%|
|Keysight Technologies Inc||2.91%||Infineon Technologies AG||1.69%|
|Verizon Communications Inc.||2.83%||Fujitsu Limited||1.69%|
|Cisco Systems, Inc.||2.80%||Viavi Solutions Inc||1.68%|
Source: ETF.com; data as of July 30, 2019
For example, chip manufacturer Skyworks Solutions (SWKS) is the top holding in FIVG, at 5.4%, but it only makes up 1.7% of NXTG. Analog Devices (ADI), FIVG's second biggest holding, doesn't even show up in NXTG. Its third largest holding, Nokia at 5.2%, comprises 1.7% of NXTG.
(Use our stock finder tool to find an ETF’s allocation to a certain stock.)
Meanwhile, Win Semiconductors, Micron Technology and Lumentum Holdings, NXTG's top three stocks, don't appear in FIVG at all.
Furthermore, although these three stocks are all strong performers year to date, their ability to drive NXTG is hampered because they make up such small slices (2% each) of the ETF's overall portfolio. NXTG's tiered, equal-weighting scheme ends up diluting the impact from any one particular stock.
Story Remains The Same
This is a story we've seen many times before. Plenty of hot themes—especially in tech—have ended up with two major funds duking it out for primacy and assets: There are two main cybersecurity ETFs (the $1.6 billion ETFMG Prime Cyber Security ETF (HACK) and the $1 billion First Trust NASDAQ Cybersecurity ETF (CIBR)); two main robotics ETFs (the $1.3 billion ROBO Global Robotics and Automation Index ETF (ROBO) and the $1.5 billion Global X Robotics & Artificial Intelligence ETF (BOTZ)—and now there's FIVG and NXTG.
Each ETF has carved out its niche: FIVG takes the super-crunchy specialist's approach to 5G, while NXTG offers a broader, more comprehensive play. Judging from the flows, both ETFs are finding some success with investors.
And that's OK—there's not always a right or wrong take on a theme, just whichever one is right or wrong for the individual investor.
Contact Lara Crigger at [email protected]