Chip ETF (SMH) Posts Best Q2: 5 Stocks That Led The Way

The semiconductor sector has bounced sharply from the first-quarter lows with stocks logging in the best quarterly performance since the tech bubble in the early 2000s. Notably, the PHLX Semiconductor Index rose nearly 39% in the second quarter.

Chip stocks have shown strong resilience amid the coronavirus pandemic on stay-at-home trends, which has bolstered demand for gaming chips and data center business. Additionally, rapid adoption of cloud, Internet of Things, autonomous cars, gaming, wearables, VR headsets, drones, virtual reality devices, artificial intelligence, cryptocurrencies, 5G and other advanced information technologies are also fueling growth.

As semiconductors have been the most important drivers of the overall growth in technology, it is now used in day-to-day life from cars, electronic gadgets to planes and weapons. Chipmakers power much of the world’s technology with their new innovation and set the stage for digitalization in various corners like healthcare, transport, financial systems, defense, agriculture, retail, and many others.

Although all semiconductor ETFs have performed remarkably well, VanEck Vectors Semiconductor ETF (SMH - Free Reportis the real winner. The ETF was up almost 30%, marking its best quarter since the fourth quarter of 2001.

SMH in Focus

This fund offers exposure to companies involved in semiconductor production and equipment by tracking the MVIS US Listed Semiconductor 25 Index. It holds 25 stocks in its basket with a double-digit concentration on the top two firms. Although the United States take the top spot from a country look with 77.7% share in the portfolio, Taiwan, Netherlands, and Switzerland round off the next three spots. The product has managed assets worth $2.2 billion and charges 35 bps in annual fees and expenses. The ETF trades in average daily volume of more than 5 million shares and has a Zacks ETF Rank #2 (Buy) with a High risk outlook.

Though most of the stocks in the fund’s portfolio delivered strong returns, some stocks gained more than 50% in the second quarter. Below we have highlighted those five best-performing stocks in the ETF with their respective positions in the basket:

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