Defiance 5G Next Gen Connectivity ETF: An Easy Way to Play 5G Stocks?

Defiance 5G Next Gen Connectivity ETF: Easy Way to Invest in 5G?Want to Invest in 5G Stocks? Read This

For the most part, exchange traded funds (ETFs) are nothing exciting. An ETF typically holds a basket of stocks or commodities and it tends to track an underlying index. Therefore, owning an ETF is often considered a cost-effective way to get exposure to a collection of stocks.

For instance, if an investor wants to build a portfolio of S&P 500 companies, they can buy all 500 stocks one by one or they can simply buy an ETF that tracks the S&P 500 index.

ETFs do charge a management fee, but in the case of most index funds, the fees are not substantial. By paying that small fee, investors can save the time, effort, and transaction costs associated with buying every security in the underlying index.

And because ETFs trade on stock exchanges (as their name suggests), investors can buy and sell them throughout the trading day, just like they would with regular stocks.

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And not all ETFs are boring, either. For instance, Defiance 5G Next Gen Connectivity ETF (NYSEARCA:FIVG) is an ETF that focuses on one of the hottest investment themes right now: 5G.

If you’ve been following tech stocks in recent years, you’d know that 5G has become a major catalyst for a lot of companies. Do a Google search of “best 5G stocks” and you’ll see companies coming from a wide range of backgrounds.

From wireless carriers and cellphone tower operators to semiconductor companies and smartphone makers, a lot of stocks have gotten renewed investor attention because of 5G.

Then there are companies working on the Internet of Things (IoT), drones, autonomous driving, and remote healthcare. Moving to the 5G era is expected to make these “next big thing” applications a reality.

To put it simply, there could be numerous companies that qualify as the best 5G stocks. And instead of trying to figure out exactly which ones are the best among the best, investors can get exposure to a whole bunch of them through Defiance 5G Next Gen Connectivity ETF.

You see, FIVG tracks the BlueStar 5G Communications Index, which is made up of companies that are either involved in the development of 5G networks or are instrumental in the rollout of 5G networks. (Source: “Supplement to the Summary Prospectus, Prospectus and Statement of Additional Information (“SAI”), each dated April 30, 2020,” Defiance ETFs, April 30, 2020.)

The components of the BlueStar 5G Communications Index are reviewed semi-annually for eligibility, with the weight of each stock being reset using a tiered market capitalization weighting strategy.

Top 10 Holdings of Defiance 5G Next Gen Connectivity ETF

Right now, FIVG ETF has 78 holdings. The table below shows the fund’s top 10 holdings as of August 11, 2020.

Company Name Stock Symbol Percentage Of Net Assets
Qualcomm, Inc. NASDAQ:QCOM 5.7%
Telefonaktiebolaget LM Ericsson NASDAQ:ERIC 5.2%
NXP Semiconductors NV NASDAQ:NXPI 5.1%
Analog Devices, Inc. NASDAQ:ADI 4.4%
Xilinx, Inc. NASDAQ:XLNX 3.7%
Nokia Oyj NYSE:NOK 3.3%
Verizon Communications Inc. NYSE:VZ 2.8%
Skyworks Solutions Inc NASDAQ:SWKS 2.8%
American Tower Corp NYSE:AMT 2.7%
Maxim Integrated Prods Inc. NASDAQ:MXIM 2.7%

(Source: “The First 5G ETF,” Defiance ETFs, last accessed August 11, 2020.)

As you might expect, the list of companies includes some familiar names that are often associated with 5G, such as chip maker Qualcomm, Inc. (NASDAQ:QCOM), telecommunications giant Verizon Communications Inc. (NYSE:VZ), and cell tower real estate investment trust (REIT) American Tower Corp (NYSE:AMT).

Defiance 5G Next Gen Connectivity FIVG ETF was launched on March 4, 2019, so it does not have a very long history. But this shouldn’t come as a surprise, since the 5G investment theme has only been popular for a few years and adoption of the technology is still at an early stage. In fact, 5G Next Gen Connectivity ETF is the first ETF that tracks the sector.

Since its inception, FIVG ETF has delivered a total return of about 18%. (Source: Ibid.)

Of course, the fund does charge a fee; its expense ratio is 0.3%.

Analyst Take

By offering ultra-low latency and a data transmission speed that’s up to 100 times faster than 4G networks, 5G technology could be a growth driver for a lot of companies.

With Defiance 5G Next Gen Connectivity ETF, investors have an easy and cost-effective way to get diverse exposure to 5G stocks.