What this ETF is trying to do

The FIRST TRUST NASDAQ PHARMACEUTICALS ETF (FTXH) is an exchange-traded fund designed to provide exposure to the pharmaceutical industry. It focuses on companies involved in making medicines and healthcare products. According to its top holdings, the fund invests in large pharmaceutical companies like Eli Lilly and Co, AbbVie Inc, Merck & Co Inc, and Johnson & Johnson. Please note that the list of holdings provided is partial and only shows the largest companies in the portfolio.

What the numbers show

The data shows that FTXH has experienced significant growth in its share price over various timeframes.

• Year-to-Date (YTD): The price return is approximately 22.80%.

• One-Year: The share-price return was approximately 37.29%.

• Three-Year: The share-price return was approximately 57.72%.

It is important to understand the difference between price return and total return. Price return only measures how much the share price itself changed. Total return includes both the price change and any cash distributions paid out to investors.

For FTXH, the total returns are higher than the price returns:

• The YTD total return is approximately 23.35%.

• The one-year total return is approximately 38.45%.

• The three-year total return is approximately 64.42%.

To visualize the price change, an investor could look at the estimated price from roughly one year ago, which was $29.46, compared to the current price of $40.45.

Income and distribution explanation

FTXH provides cash distributions to investors. The current distribution yield is approximately 0.72%. This means the fund paid out a certain amount of cash relative to its current share price. The trailing distributions were $0.29.

The fund usually pays these distributions on a quarterly basis, with four payments recorded over the last 12 months. While some investors look for high yields to provide income, it is important to remember that a distribution yield is not the same as total return.

NAV erosion explanation

"NAV erosion" refers to a decline in the Net Asset Value (the actual value of the assets held by the fund). The supplied data is sufficient to evaluate price erosion, but it does not include enough historical NAV-per-share data to confirm or rule out NAV erosion.

However, regarding price erosion (the decline in the market price of the shares), the fund has an erosion score of 100, which is labeled as "No price erosion detected." The erosion severity is rated as "good," and there is no severe erosion-risk flag present.

Pros

• Strong Price Growth: The fund has shown significant positive price returns over the last year and three years.

• Positive Total Returns: The total return figures are higher than the price-only returns, showing that distributions have added to the overall value.

• Low Price Erosion Risk: The data indicates no detected price erosion.

Cons

• Sector Concentration: Because this ETF focuses on pharmaceuticals, its performance is tied to that specific industry.

• Lower Yield: The distribution yield of 0.72% is relatively low compared to funds designed specifically for high income.

Beginner takeaway

FTXH is a pharmaceutical-focused ETF that has recently seen strong growth in both its share price and its total return. While it pays a quarterly distribution, the primary driver of its recent performance has been the increase in share price. There are currently no indicators of significant price erosion in the supplied data.