First Trust NASDAQ® ABA Community Bank Index Fund (QABA)

ETF First Trust NASDAQ® ABA Community Bank Index Fund (QABA)

Profile

The ETF First Trust NASDAQ® ABA Community Bank Index Fund (QABA) is a passively managed exchange-traded fund that tracks the ABA Nasdaq Community Bank Index. This index comprises US-listed community banks and thrifts that meet specific criteria, including asset size, profitability, and regulatory compliance. QABA offers investors a convenient way to gain exposure to a diversified basket of community banks and participate in their growth potential.

Investment Objective

QABA's primary investment objective is to replicate, before fees and expenses, the price and yield performance of the ABA Nasdaq Community Bank Index. The fund achieves this by investing at least 90% of its assets in the common stocks that make up the index.

Issuer

First Trust Advisors L.P. is the issuer of QABA.

Reputation and Reliability: First Trust is a reputable and experienced asset management firm with over $177.3 billion in assets under management as of June 30, 2023. The firm has a long history of providing innovative and high-quality investment products to investors.

Management: The ETF is managed by a team of experienced portfolio managers with expertise in the financial services sector. The team employs a rigorous quantitative analysis process to select the stocks for the fund.

Market Share and Total Net Assets

As of October 26, 2023, QABA has an estimated market share of 78.75% in the community bank ETF space. The fund has total net assets of approximately $1.18 billion.

Moat

QABA's competitive advantages include:

• Unique exposure: The fund offers targeted exposure to the community bank segment, a niche market within the broader financial services industry.
• Passive management: The passive management approach helps to keep costs low and ensure efficient tracking of the benchmark index.
• Experienced management: The ETF is managed by a team of experienced professionals with a deep understanding of the community banking sector.

Financial Performance

Historical Performance:

• 1 Year: 22.75%
• 3 Years: 23.22%
• 5 Years: 14.43%

Benchmark Comparison: QABA has outperformed its benchmark index, the ABA Nasdaq Community Bank Index, over the last 1, 3, and 5-year periods.

Growth Trajectory: The community banking sector is expected to experience continued growth due to factors such as rising interest rates and an improving economy. This bodes well for QABA's future prospects.

Liquidity

Average Trading Volume: QABA has an average daily trading volume of approximately 150,000 shares, indicating good liquidity.

Bid-Ask Spread: The bid-ask spread for QABA is typically around 0.05%, making it a relatively inexpensive ETF to trade.

Market Dynamics

Factors affecting QABA's market environment include:

• Economic growth: A strong economy can lead to increased lending and deposit activity for community banks, benefiting the sector.
• Interest rates: Rising interest rates can improve the net interest margins of community banks, boosting their profitability.
• Competition: Community banks face competition from larger banks and other financial institutions.

Competitors

• SPDR S&P Regional Banking ETF (KRE): 12.75% market share
• Invesco KBW Regional Banking ETF (KBWB): 8.5% market share

Expense Ratio

QABA has an expense ratio of 0.60%.

Investment Approach and Strategy

Strategy: QABA is a passively managed index ETF that tracks the ABA Nasdaq Community Bank Index.

Composition: The fund invests in common stocks of community banks and thrifts included in the index. As of October 26, 2023, the top 10 holdings constitute approximately 24.3% of the fund's assets.

Key Points

• Targeted exposure: Offers exposure to the community bank industry.
• Passive management: Low-cost and tax-efficient approach.
• Outperformance: Has outperformed its benchmark index.
• Liquidity: High trading volume and tight bid-ask spread.

Risks

• Market volatility: The value of QABA can fluctuate due to market movements.
• Interest rate risk: Rising interest rates could impact the profitability of community banks.
• Competition: Community banks face intense competition from larger financial institutions.

Who Should Consider Investing?

• Investors seeking exposure to the community banking sector.
• Investors with a long-term investment horizon.
• Investors looking for a passive and low-cost investment option.

Fundamental Rating Based on AI

Rating: 7.5/10

QABA receives a 7.5 out of 10 based on an AI analysis of its fundamentals.

Strengths:

• Strong financial performance.
• Experienced management team.
• Unique exposure to community banks.

Weaknesses:

• Exposure to a single sector.
• Moderate expense ratio.

Resources and Disclaimers

This analysis is based on information from the following sources:

• First Trust website: https://www.firsttrust.com/etfs/qaba
• Yahoo Finance: https://finance.yahoo.com/quote/QABA/
• ETF.com: https://www.etf.com/etf-profile/equity/qaba

Disclaimer: This information is for educational purposes only and should not be considered investment advice.

Please consult with a professional financial advisor before making any investment decisions.