A new ETF began trading on NASDAQ on Friday based on an index that tracks smart phone companies. The First Trust NASDAQ CEA Smartphone Index Fund trades under the ticker FONE.
"The smart phone industry has enormous growth and has the potential to grow for years and years to come," Ryan Issakainen, an ETF strategist at First Trust, told AdvisorOne. "The fund is good for investors interested in growth and avoiding the vast difficulties in picking a specific stock."
"We designed a fund with low costs that is transparent, liquid and tax efficient. The strategy makes sense for a long time and the smart phone industry has a long way to go," Issakainen added.
The fund is allocated between handsets, hardware and software applications, and network providers, according to Issakainen. Forty-five percent of the fund goes to handset makers like Apple, Research in Motion and Nokia, while 45% is allocated to companies that make software and equipment. Those allocations are spread evenly between 45 holdings, Issakainen said. The remaining 10% of holdings go to network providers globally, including Vodafone, Deutsche Telekom and China Mobile.
According to the fund prospectus, annual operating expenses are 0.7%. The fund began trading at $30.30.
Bloomberg estimates sales of smart phones will outpace sales of PCs by 2012 and U.S. smart phone adoptionat the end of 2010 was 27%, up from 16.8% in 2009, according to comScore.
The NASDAQOMX CEA Smartphone Index was introduced in April 2010. It tracks companies that build and design smart phones and their accessories, including software and mobile networks. The top 10 index holdings as of Dec. 31, 2010 were Compal Communications Inc.; Motorola Inc.; Samsung Electronics Co.; LG Electronics Inc.; HTC Corporation; Celestica Inc.; Benchmark Electronics Inc.; Wistron Corp.; Nokia OYJ; Inventec Corp.