Looking for broad exposure to the Financials - Community Banks segment of the equity market? You should consider the First Trust NASDAQ ABA Community Bank Index Fund (QABA), a passively managed exchange traded fund launched on 06/29/2009.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials - Community Banks is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 6, placing it in top 38%.
The fund is sponsored by First Trust Advisors. It has amassed assets over $264.60 M, making it one of the average sized ETFs attempting to match the performance of the Financials - Community Banks segment of the equity market. QABA seeks to match the performance of the NASDAQ OMX ABA Community Bank Index before fees and expenses.
The NASDAQ OMX ABA Community Bank Index is a market capitalization-weighted index. The Index includes a subset of banks and thrifts or their holding companies listed on NASDAQ.
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
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 1.60%.
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.
This ETF has heaviest allocation in the Financials sector--about 99.70% of the portfolio.
Looking at individual holdings, East West Bancorp, Inc. (EWBC) accounts for about 3.09% of total assets, followed by Commerce Bancshares, Inc. (CBSH) and Popular, Inc. (BPOP).
The top 10 holdings account for about 21.23% of total assets under management.
Performance and Risk
The ETF has lost about -14.28% so far this year and is down about -15.24% in the last one year (as of 12/18/2018). In that past 52-week period, it has traded between $44.47 and $58.34.
The ETF has a beta of 0.96 and standard deviation of 20.30% for the trailing three-year period, making it a high risk choice in the space. With about 165 holdings, it effectively diversifies company-specific risk.
First Trust NASDAQ ABA Community Bank Index Fund carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, QABA is a good option for those seeking exposure to the Financials ETFs area of the market. Investors might also want to consider some other ETF options in the space.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report FT-NDQ ABA CBIF (QABA): ETF Research Reports Commerce Bancshares, Inc. (CBSH): Free Stock Analysis Report Popular, Inc. (BPOP): Free Stock Analysis Report East West Bancorp, Inc. (EWBC): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research