In the world of semiconductor ETFs, the question of which is the best buy right now is a complex one, with three main contenders: SMH, SOXX, and SOXQ. While all three hold substantially the same names, the key differences lie in cost and concentration. SMH, the most top-heavy of the three, has a 36% average annual return over the past five years, making it the clear winner in terms of performance. However, its high concentration in mega-caps may be a concern for some investors. SOXX, on the other hand, has a more balanced portfolio due to its individual holding caps, but its higher expense ratio of 0.34% may be a detractor. SOXQ, the cheapest of the three with a 0.19% expense ratio, is a slightly more diversified play at nearly half the cost. Despite minor differences in portfolio construction, these three ETFs are likely to perform similarly, with the winner depending on whether mega-caps are leading or not. In my opinion, the Invesco PHLX Semiconductor ETF (SOXQ) is the winner, but it should be considered a satellite, not a core, holding. Limit your position sizing, but capex spending, along with anticipated revenue and earnings growth over the next couple of years, should make this a winner.
