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Is First Trust IndustrialsProducer Durables AlphaDEX ETF (FXR) a Strong ETF Right Now?
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The First Trust IndustrialsProducer Durables AlphaDEX ETF (FXR - Free Report) was launched on 05/08/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Because the fund has amassed over $1.88 billion, this makes it one of the larger ETFs in the Industrials ETFs. FXR is managed by First Trust Advisors. This particular fund, before fees and expenses, seeks to match the performance of the StrataQuant Industrials Index.
The StrataQuant Industrials Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.61%.
The fund has a 12-month trailing dividend yield of 0.53%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 65% of the portfolio, the fund has heaviest allocation to the Industrials sector; Materials and Information Technology round out the top three.
Taking into account individual holdings, Generac Holdings Inc. (GNRC - Free Report) accounts for about 1.40% of the fund's total assets, followed by Builders Firstsource, Inc. (BLDR - Free Report) and Bill.com Holdings, Inc. (BILL - Free Report) .
Its top 10 holdings account for approximately 13.31% of FXR's total assets under management.
Performance and Risk
The ETF has lost about -1.16% so far this year and was up about 18.72% in the last one year (as of 01/12/2022). In the past 52-week period, it has traded between $49.25 and $63.
The fund has a beta of 1.31 and standard deviation of 26.94% for the trailing three-year period, which makes FXR a medium risk choice in this particular space. With about 133 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust IndustrialsProducer Durables AlphaDEX ETF is a reasonable option for investors seeking to outperform the Industrials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Industrials ETF (VIS - Free Report) tracks MSCI US Investable Market Industrials 25/50 Index and the Industrial Select Sector SPDR ETF (XLI - Free Report) tracks Industrial Select Sector Index. Vanguard Industrials ETF has $5.22 billion in assets, Industrial Select Sector SPDR ETF has $18.21 billion. VIS has an expense ratio of 0.10% and XLI charges 0.12%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Industrials ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Is First Trust IndustrialsProducer Durables AlphaDEX ETF (FXR) a Strong ETF Right Now?
The First Trust IndustrialsProducer Durables AlphaDEX ETF (FXR - Free Report) was launched on 05/08/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Because the fund has amassed over $1.88 billion, this makes it one of the larger ETFs in the Industrials ETFs. FXR is managed by First Trust Advisors. This particular fund, before fees and expenses, seeks to match the performance of the StrataQuant Industrials Index.
The StrataQuant Industrials Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.61%.
The fund has a 12-month trailing dividend yield of 0.53%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 65% of the portfolio, the fund has heaviest allocation to the Industrials sector; Materials and Information Technology round out the top three.
Taking into account individual holdings, Generac Holdings Inc. (GNRC - Free Report) accounts for about 1.40% of the fund's total assets, followed by Builders Firstsource, Inc. (BLDR - Free Report) and Bill.com Holdings, Inc. (BILL - Free Report) .
Its top 10 holdings account for approximately 13.31% of FXR's total assets under management.
Performance and Risk
The ETF has lost about -1.16% so far this year and was up about 18.72% in the last one year (as of 01/12/2022). In the past 52-week period, it has traded between $49.25 and $63.
The fund has a beta of 1.31 and standard deviation of 26.94% for the trailing three-year period, which makes FXR a medium risk choice in this particular space. With about 133 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust IndustrialsProducer Durables AlphaDEX ETF is a reasonable option for investors seeking to outperform the Industrials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Industrials ETF (VIS - Free Report) tracks MSCI US Investable Market Industrials 25/50 Index and the Industrial Select Sector SPDR ETF (XLI - Free Report) tracks Industrial Select Sector Index. Vanguard Industrials ETF has $5.22 billion in assets, Industrial Select Sector SPDR ETF has $18.21 billion. VIS has an expense ratio of 0.10% and XLI charges 0.12%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Industrials ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.