March 25, 2011

First Trust Nasdaq CEA Smartphone Index Fund (FONE)

• Editor's Pick

Written By Chloe Lutts

From StreetAuthority MarketAdvisor: “First Trust Nasdaq CEA Smartphone Index Fund (FONE) — Last month, First Trust launched a specialized fund designed to cash in on the smartphone revolution. Ordinarily, I would say such a narrow focus is more gimmick than useful. But in the case of smartphones, there are billions of dollars changing hands—and this is where they end up. …

“The portfolio covers the smartphone industry from every angle. About 45% of the portfolio is reserved for handset makers, 45% for vendors that supply internal software and components, and 10% for network providers. You’ll find the obligatory Apple (AAPL). But shareholders will also have access to BYD, which makes rechargeable lithium batteries, Skyworks Solutions (SWKS), which supplies critical chips, and Foxconn, which does the actual manufacturing (it’s now rolling out 137,000 iPhone 4s per day, 90 a minute). Then there are wireless infrastructure companies like Qualcomm (QCOM) and American Tower (AMT). And, of course, the service providers that are collecting fat monthly paychecks from all those hundreds of millions of subscribers— from AT&T (T) to Telefonica (TEF) to China Unicom (CHU). All told, the portfolio covers the shares of 74 well-positioned companies representing Taiwan, Japan, South Korea and a dozen other countries. The sale of just one smartphone puts cash in many pockets. And consumers around the world are buying 1.1 million every day. And while it might seem like everyone you know is already carrying one of these versatile devices, that’s not the case in emerging markets—where penetration is just starting to ramp up. FONE shouldn’t be viewed as a pure play (holdings like Sony have other interests besides smartphones). But it’s still a well-rounded tech fund with an emphasis in the right place.”

Nathan Slaughter, StreetAuthority Market Advisor, 3/11/11