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Is First Trust Consumer Staples AlphaDEX ETF (FXG) a Strong ETF Right Now?
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The First Trust Consumer Staples AlphaDEX ETF (FXG - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Consumer Staples ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $690.29 million, this makes it one of the average sized ETFs in the Consumer Staples ETFs. FXG is managed by First Trust Advisors. FXG, before fees and expenses, 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.64% for this ETF, which makes it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 1.26%.
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.
FXG's heaviest allocation is in the Consumer Staples sector, which is about 86.30% of the portfolio. Its Healthcare and Materials round out the top three.
Taking into account individual holdings, Performance Food Group Company (PFGC - Free Report) accounts for about 4.50% of the fund's total assets, followed by Mckesson Corporation (MCK - Free Report) and Walgreens Boots Alliance, Inc. (WBA - Free Report) .
FXG's top 10 holdings account for about 40.03% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust Consumer Staples AlphaDEX ETF has added about 6.29% so far, and is up about 11.09% over the last 12 months (as of 11/23/2022). FXG has traded between $56.74 and $67.92 in this past 52-week period.
The ETF has a beta of 0.68 and standard deviation of 19.70% for the trailing three-year period, making it 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 an excellent option for investors seeking to outperform the Consumer Staples ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
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 $6.78 billion in assets, Consumer Staples Select Sector SPDR ETF has $17.26 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?
The First Trust Consumer Staples AlphaDEX ETF (FXG - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Consumer Staples ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $690.29 million, this makes it one of the average sized ETFs in the Consumer Staples ETFs. FXG is managed by First Trust Advisors. FXG, before fees and expenses, 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.64% for this ETF, which makes it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 1.26%.
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.
FXG's heaviest allocation is in the Consumer Staples sector, which is about 86.30% of the portfolio. Its Healthcare and Materials round out the top three.
Taking into account individual holdings, Performance Food Group Company (PFGC - Free Report) accounts for about 4.50% of the fund's total assets, followed by Mckesson Corporation (MCK - Free Report) and Walgreens Boots Alliance, Inc. (WBA - Free Report) .
FXG's top 10 holdings account for about 40.03% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust Consumer Staples AlphaDEX ETF has added about 6.29% so far, and is up about 11.09% over the last 12 months (as of 11/23/2022). FXG has traded between $56.74 and $67.92 in this past 52-week period.
The ETF has a beta of 0.68 and standard deviation of 19.70% for the trailing three-year period, making it 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 an excellent option for investors seeking to outperform the Consumer Staples ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
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 $6.78 billion in assets, Consumer Staples Select Sector SPDR ETF has $17.26 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.