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Is First Trust Materials AlphaDEX ETF (FXZ) a Strong ETF Right Now?
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A smart beta exchange traded fund, the First Trust Materials AlphaDEX ETF (FXZ - Free Report) debuted on 05/08/2007, and offers broad exposure to the Materials ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
FXZ is managed by First Trust Advisors, and this fund has amassed over $486.97 million, which makes it one of the average sized ETFs in the Materials ETFs. FXZ, before fees and expenses, seeks to match the performance of the StrataQuant Materials Index.
The StrataQuant Materials 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.64%, making it one of the more expensive products in the space.
It's 12-month trailing dividend yield comes in at 1.20%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
FXZ's heaviest allocation is in the Materials sector, which is about 91.80% of the portfolio.
Looking at individual holdings, The Mosaic Company (MOS - Free Report) accounts for about 5.20% of total assets, followed by Steel Dynamics, Inc. (STLD - Free Report) and Olin Corporation (OLN - Free Report) .
FXZ's top 10 holdings account for about 44.61% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust Materials AlphaDEX ETF has lost about -7% so far, and was up about 21.78% over the last 12 months (as of 01/28/2022). FXZ has traded between $47.50 and $64.11 in this past 52-week period.
The ETF has a beta of 1.26 and standard deviation of 30.97% for the trailing three-year period, making it a medium risk choice in the space. With about 37 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Materials AlphaDEX ETF is an excellent option for investors seeking to outperform the Materials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR - Free Report) tracks Morningstar Global Upstream Natural Resources Index and the Materials Select Sector SPDR ETF (XLB - Free Report) tracks Materials Select Sector Index. FlexShares Morningstar Global Upstream Natural Resources ETF has $6.79 billion in assets, Materials Select Sector SPDR ETF has $7.81 billion. GUNR has an expense ratio of 0.46% and XLB 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 Materials 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 Materials AlphaDEX ETF (FXZ) a Strong ETF Right Now?
A smart beta exchange traded fund, the First Trust Materials AlphaDEX ETF (FXZ - Free Report) debuted on 05/08/2007, and offers broad exposure to the Materials ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
FXZ is managed by First Trust Advisors, and this fund has amassed over $486.97 million, which makes it one of the average sized ETFs in the Materials ETFs. FXZ, before fees and expenses, seeks to match the performance of the StrataQuant Materials Index.
The StrataQuant Materials 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.64%, making it one of the more expensive products in the space.
It's 12-month trailing dividend yield comes in at 1.20%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
FXZ's heaviest allocation is in the Materials sector, which is about 91.80% of the portfolio.
Looking at individual holdings, The Mosaic Company (MOS - Free Report) accounts for about 5.20% of total assets, followed by Steel Dynamics, Inc. (STLD - Free Report) and Olin Corporation (OLN - Free Report) .
FXZ's top 10 holdings account for about 44.61% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust Materials AlphaDEX ETF has lost about -7% so far, and was up about 21.78% over the last 12 months (as of 01/28/2022). FXZ has traded between $47.50 and $64.11 in this past 52-week period.
The ETF has a beta of 1.26 and standard deviation of 30.97% for the trailing three-year period, making it a medium risk choice in the space. With about 37 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Materials AlphaDEX ETF is an excellent option for investors seeking to outperform the Materials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR - Free Report) tracks Morningstar Global Upstream Natural Resources Index and the Materials Select Sector SPDR ETF (XLB - Free Report) tracks Materials Select Sector Index. FlexShares Morningstar Global Upstream Natural Resources ETF has $6.79 billion in assets, Materials Select Sector SPDR ETF has $7.81 billion. GUNR has an expense ratio of 0.46% and XLB 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 Materials 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.