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Is First Trust Energy AlphaDEX ETF (FXN) a Strong ETF Right Now?
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The First Trust Energy AlphaDEX ETF (FXN - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Energy 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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
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
The fund is managed by First Trust Advisors, and has been able to amass over $1.60 billion, which makes it one of the larger ETFs in the Energy ETFs. FXN, before fees and expenses, seeks to match the performance of the StrataQuant Energy Index.
The StrataQuant Energy 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 FXN are 0.64%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.95%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 94% of the portfolio, the fund has heaviest allocation to the Energy sector.
When you look at individual holdings, Conocophillips (COP - Free Report) accounts for about 5.17% of the fund's total assets, followed by Pioneer Natural Resources Company (PXD - Free Report) and Diamondback Energy, Inc. (FANG - Free Report) .
The top 10 holdings account for about 45.48% of total assets under management.
Performance and Risk
So far this year, FXN return is roughly 30.65%, and was up about 58.68% in the last one year (as of 03/30/2022). During this past 52-week period, the fund has traded between $9.56 and $16.37.
FXN has a beta of 2.05 and standard deviation of 47.76% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 37 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Energy AlphaDEX ETF is a reasonable option for investors seeking to outperform the Energy ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Energy ETF (VDE - Free Report) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR ETF (XLE - Free Report) tracks Energy Select Sector Index. Vanguard Energy ETF has $8.48 billion in assets, Energy Select Sector SPDR ETF has $37.46 billion. VDE has an expense ratio of 0.10% and XLE charges 0.10%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Energy 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 Energy AlphaDEX ETF (FXN) a Strong ETF Right Now?
The First Trust Energy AlphaDEX ETF (FXN - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Energy 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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
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
The fund is managed by First Trust Advisors, and has been able to amass over $1.60 billion, which makes it one of the larger ETFs in the Energy ETFs. FXN, before fees and expenses, seeks to match the performance of the StrataQuant Energy Index.
The StrataQuant Energy 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 FXN are 0.64%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.95%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 94% of the portfolio, the fund has heaviest allocation to the Energy sector.
When you look at individual holdings, Conocophillips (COP - Free Report) accounts for about 5.17% of the fund's total assets, followed by Pioneer Natural Resources Company (PXD - Free Report) and Diamondback Energy, Inc. (FANG - Free Report) .
The top 10 holdings account for about 45.48% of total assets under management.
Performance and Risk
So far this year, FXN return is roughly 30.65%, and was up about 58.68% in the last one year (as of 03/30/2022). During this past 52-week period, the fund has traded between $9.56 and $16.37.
FXN has a beta of 2.05 and standard deviation of 47.76% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 37 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Energy AlphaDEX ETF is a reasonable option for investors seeking to outperform the Energy ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Energy ETF (VDE - Free Report) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR ETF (XLE - Free Report) tracks Energy Select Sector Index. Vanguard Energy ETF has $8.48 billion in assets, Energy Select Sector SPDR ETF has $37.46 billion. VDE has an expense ratio of 0.10% and XLE charges 0.10%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Energy 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.