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Is First Trust Consumer Staples AlphaDEX ETF (FXG) a Strong ETF Right Now?
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A smart beta exchange traded fund, the First Trust Consumer Staples AlphaDEX ETF (FXG - Free Report) debuted on 05/08/2007, and offers broad exposure to the Consumer Staples 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 offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: 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
Managed by First Trust Advisors, FXG has amassed assets over $633.22 million, making it one of the average sized ETFs in the Consumer Staples ETFs. Before fees and expenses, FXG seeks to match the performance of the StrataQuant Consumer Staples Index.
The StrataQuant Consumer Staples 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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.64%, making it one of the most expensive products in the space.
FXG's 12-month trailing dividend yield is 1.25%.
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.
FXG's heaviest allocation is in the Consumer Staples sector, which is about 86.70% of the portfolio. Its Healthcare and Materials round out the top three.
When you look at individual holdings, Mckesson Corporation (MCK - Free Report) accounts for about 4.51% of the fund's total assets, followed by Sysco Corporation (SYY - Free Report) and Molson Coors Beverage Company (TAP - Free Report) .
The top 10 holdings account for about 40.16% of total assets under management.
Performance and Risk
So far this year, FXG has added roughly 0.47%, and it's up approximately 11.81% in the last one year (as of 07/22/2022). During this past 52-week period, the fund has traded between $55.06 and $67.92.
FXG has a beta of 0.64 and standard deviation of 19.17% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 41 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Consumer Staples AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Staples ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Staples ETF (VDC - Free Report) tracks MSCI US Investable Market Consumer Staples 25/50 Index and the Consumer Staples Select Sector SPDR ETF (XLP - Free Report) tracks Consumer Staples Select Sector Index. Vanguard Consumer Staples ETF has $6.40 billion in assets, Consumer Staples Select Sector SPDR ETF has $15.25 billion. VDC has an expense ratio of 0.10% and XLP 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 Consumer Staples 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 Consumer Staples AlphaDEX ETF (FXG) a Strong ETF Right Now?
A smart beta exchange traded fund, the First Trust Consumer Staples AlphaDEX ETF (FXG - Free Report) debuted on 05/08/2007, and offers broad exposure to the Consumer Staples 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 offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: 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
Managed by First Trust Advisors, FXG has amassed assets over $633.22 million, making it one of the average sized ETFs in the Consumer Staples ETFs. Before fees and expenses, FXG seeks to match the performance of the StrataQuant Consumer Staples Index.
The StrataQuant Consumer Staples 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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.64%, making it one of the most expensive products in the space.
FXG's 12-month trailing dividend yield is 1.25%.
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.
FXG's heaviest allocation is in the Consumer Staples sector, which is about 86.70% of the portfolio. Its Healthcare and Materials round out the top three.
When you look at individual holdings, Mckesson Corporation (MCK - Free Report) accounts for about 4.51% of the fund's total assets, followed by Sysco Corporation (SYY - Free Report) and Molson Coors Beverage Company (TAP - Free Report) .
The top 10 holdings account for about 40.16% of total assets under management.
Performance and Risk
So far this year, FXG has added roughly 0.47%, and it's up approximately 11.81% in the last one year (as of 07/22/2022). During this past 52-week period, the fund has traded between $55.06 and $67.92.
FXG has a beta of 0.64 and standard deviation of 19.17% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 41 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Consumer Staples AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Staples ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Staples ETF (VDC - Free Report) tracks MSCI US Investable Market Consumer Staples 25/50 Index and the Consumer Staples Select Sector SPDR ETF (XLP - Free Report) tracks Consumer Staples Select Sector Index. Vanguard Consumer Staples ETF has $6.40 billion in assets, Consumer Staples Select Sector SPDR ETF has $15.25 billion. VDC has an expense ratio of 0.10% and XLP 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 Consumer Staples 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.