Smartphone ETF On The Horizon?

by on April 13, 2010 | ETFs Mentioned:

Earlier this week, Nasdaq announced a new index for companies engaged in the manufacturing or development of smartphone products. The benchmark, known as the NASDAQ OMX CEA Smartphone Index (QFON), also includes companies involved in the distribution of handsets, hardware, software, and mobile networks associated with the development, sale, and usage of smartphones. The Nasdaq classifies a smartphone as a wireless, mobile communication device offering advanced capabilities and functionalities, including web access, through the use of an identifiable operating system.

The index debuted at a price of $250 and has managed to stay above that mark in the first few days of trading. It includes 84 companies and has weightings in firms such as Motorola, Apple, Palm, Google, and Samsung, among many others. The individual companies will also have to meet a few rules in order to be included in the index. These including trading on an index eligible exchange as well as having a minimum float-adjusted worldwide market capitalization of $250 million, and a minimum three-month average daily dollar trading volume of $1 million. It will have a breakdown that is heavily skewed towards handsets and software/hardware companies which will each make up 45% of the index; service providers make up the remaining 10%.”This index brings sharper focus to an industry that is transforming the world’s ability to communicate, work, and interact with each other,” said NASDAQ OMX Executive Vice President John Jacobs. “Investors, thanks to this index, can now easily track companies that are working diligently to combine the benefits of the phone and computer in a single device.”

A smartphone-focused ETF was recently included in a list of ETF ideas that don’t yet exist but could be successful if introduced to U.S. investors (see other ETFs That Don’t Exist But Should). Obviously one of the first steps towards the launch of a new ETF is the identification (or development) of an index. A number of ETF issuers are no doubt taking note of this new index, and it wouldn’t be surprising to see an ETF linked to the benchmark hit the market at some point in the future.

Smartphones are growing increasingly important to many technology companies’ bottom lines and the case can certainly be made for an ETF tracking this industry, especially now that there is an index which adequately tracks the dynamic smartphone market.

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Disclosure: No positions at time of writing