A Tech ETF That Stands Above the Rest

The technology sector has outperformed this year as investors jumped on high-growth stocks. Among the various ways to access the tech segment, one smart beta tech-related exchange traded fund has stood out.

The First Trust Technology AlphaDEX Fund (NYSEArca: FXL) increased 36.9% year-to-date, compared to the 31.5% gain in the S&P 500 Information Technology Index.

The First Trust Technology AlphaDex Fund has also been a popular play in recent trading sessions. Over the past week, FXL gathered $696 million in net inflows, according to XTF data.

While traditional market capitalization-weighted funds are still the dominant players in the world of exchange traded funds, data continues to point to a rapid acceleration of growth for alternatively-indexed or smart beta ETFs, like FXL.

FXL tries to reflect the performance of the StrataQuant Technology Index, an “enhanced” index developed by ICE Data Indices, which employs the AlphaDEX stock selection methodology to select companies from the Russell 1000 Index. Specifically, IDI ranks stocks on growth factors including three, six and 12-month price appreciation, sales to price and one year sales growth, and, separately, on value factors including book value to price, cash flow to price and return on assets, according to First Trust.

The ETF includes a 28.4% tilt toward semiconductors, 23.7% to software, 19.0% to electronics, 9.5% to IT services, 8.0% internet software, 7.9% communications equipment and 3.5% tech hardware. Components are also more or less equally weighted, with top holdings including Universal Display Corporation 2.8%, Cognex 2.6%, Corporation and IPG photonics Corporations 2.5%.