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Beyond FIVG, Another ETF to Give You 5G Exposure

Sanghamitra Saha
Western Digital's (WDC) third-quarter results adversely impacted by softness in NAND flash pricing trends and sluggishness in end markets.

5G is now red hot! Investors seem interested in stocking up 5G stocks way before the technology’s global launch. We now have the pure-play 5G ETF, Defiance Next Gen Connectivity ETF FIVG, which follows the BlueStar 5G Communications Index — a rules-based index that tracks the performance of a group of U.S.-listed stocks, of global companies that are involved in the development of, or are otherwise instrumental in the rollout of 5G networks.

Radio access network equipment accounts for about 43.9% of the fund. As far as geographical categorization is concerned, the fund has 78.47% exposure to the United States. Xilinx (5%), CommScope Holding (5%) and Skyworks Solutions (5%) are the top three holdings of the fund. It charges 30 bps in fees (read: Zero Fee ETFs: What You Need to Know).

Beyond FIVG, Another Option Plans to Enter the Market

Probably sensing the exponential growth prospects, First Trust is revamping its ETF First Trust NASDAQ CEA Smartphone Index Fund FONE, which was launched in February 2011. The fund will undergo a change in index, ticker and objective from May 29 (see all Communication Services ETFs here).

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The new name will be First Trust Indxx NextG ETF NXTG, which will look to track the Indxx 5G & NextG Thematic Index. The new index will have an inclination toward 5G-specfic technology.

The index puts spotlight on “companies that have devoted, or have committed to devote, material resources to the research, development and application of fifth generation (“5G”) and next generation digital cellular technologies as they emerge. By utilizing higher frequency radio waves, 5G networks enable significantly increased data rates, reduced latency and high-density connections that were previously unavailable in preceding technological generations,” per the prospectus. However, the expense ratio of the revamped fund will remain the same as before at 0.70%.

Inside the 5G Boom

5G, the next era of smarter, faster and more efficient wireless technology, has created much hype. Deloitte Global expects about 25 operators to launch 5G service mainly in cities in 2019 with an additional 26 operators to launch in 2020. Also, the market researcher expects to see about 20 handset vendors coming up with 5G-ready handsets in 2019, with the first hitting the shelf in Q2.

By the end of 2020, 5G handset sales (15-20 million units) should make up about 1% of total smartphone sales, per Deloitte. Initially, three applications are expected out of 5G rollouts — mobile connectivity, as a modem or hotspot and as a replacement of wired broadband connection (read: Tap 5G Boom With These ETFs).

Per MarketResearch.biz, the global 5G infrastructure market is projected to be valued at nearly $0.8 billion in 2019, marking a CAGR of 48.8%. Last year, IDC estimated that Internet of Things (IoT) spending will witness a CAGR of 13.6% over the 2017-2022 forecast period and reach $1.2 trillion in 2022. This clarifies the need for efficient execution of 5G in the medium term.

Any Other ETF Options?

Apart from the above-said two, investors can play the funds like Pacer Benchmark Data & Infrastructure Real Estate Sector ETF SRVR and ALPS Disruptive Technologies ETF DTEC.

The fund SRVR comprises the U.S.-listed equity securities of companies that derive at least 85% of their earnings or revenues from real estate operations in the data and infrastructure real estate sectors. These infrastructures could be related 5G too.

On the other hand, the index of DTEC identifies companies using disruptive technologies in each of the 10 thematic areas: Healthcare Innovation, Internet of Things, Clean Energy and Smart Grid, Cloud Computing, Data and Analytics, FinTech, Robotics and Artificial Intelligence, Cybersecurity, 3D Printing, and Mobile Payments.

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First Trust NASDAQ Smartphone Index Fund (FONE): ETF Research Reports
 
Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (SRVR): ETF Research Reports
 
ALPS Disruptive Technologies ETF (DTEC): ETF Research Reports
 
DEFNC-NX GN GNC (FIVG): ETF Research Reports
 
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Zacks Investment Research
 
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