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This chip dip could be your chance to buy.
The VanEck Vectors Semiconductor ETF and the iShares PHLX Semiconductor ETF, two of the top exchange-traded funds tracking chipmakers, both lost more than 2% in intraday trading Monday following a hiccup in U.S.-China trade negotiations.
The market-cap-weighted ETFs, both of which count Qualcomm and Intel among their top holdings, have managed to skirt trade-related weakness for much of 2019, until this week. Both are still up more than 32% year to date.
That’s why some experts, like Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA, think this group’s decline is more of an opportunity than a doomsday.
“We at CFRA are still positive on a number of those semiconductor companies that you find in the concentrated SMH and the SOXX ETFs,” Rosenbluth told CNBC’s “ETF Edge” on Monday, referring to the ticker symbols for VanEck’s and iShares’ ETFs. “Larger-cap companies tend to hold up better in times of market volatility.”
Not only have most of the semiconductor makers’ earnings reports come in better than feared this quarter, but much of Monday’s weakness — largely tied to a series of tweets from President Donald Trump on Sunday threatening higher tariffs on Chinese goods — was a “knee-jerk reaction” when it comes to their stocks, Rosenbluth said.
Morningstar’s Ben Johnson, who runs the firm’s global ETF research arm, largely agreed.
“Clearly, what we’re seeing today is people are selling first and asking questions later,” Johnson said in the same “ETF Edge” interview. “This is a segment of the market that’s done phenomenally well over the course of the past one, three, five and 10 years, but the price investors have paid for that great performance has been measured in increments of volatility.”
“An ETF like SMH, which stands for ‘shake my head,’ has really earned its ticker today on a day where that volatility is, again, rearing its ugly head,” he said.
Rosenbluth wasn’t exactly shaking his head at the SMH, which he said his firm preferred over SOXX, the iShares fund.
“When we look inside the portfolio … we like a lot of the stocks that are heavily weighted, so Intel, Taiwan Semiconductor, a couple of them, ” he said. “So, Ben talked about the historical performance, but as you look forward, we at CFRA like SMH also for its liquidity and its below-average expense ratio, of those two products.”
The SMH and SOXX ETFs each ended Monday trading roughly 1.5% lower, having reversed course with the broader market.
