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Is First Trust Energy AlphaDEX ETF (FXN) a Strong ETF Right Now?
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Launched on 05/08/2007, the First Trust Energy AlphaDEX ETF (FXN - Free Report) is a smart beta exchange traded fund offering broad exposure to the Energy ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
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.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
FXN is managed by First Trust Advisors, and this fund has amassed over $665.23 million, 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for this ETF are 0.61%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 3.05%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
For FXN, it has heaviest allocation in the Energy sector --about 98.30% of the portfolio.
When you look at individual holdings, Chevron Corporation (CVX - Free Report) accounts for about 7.07% of the fund's total assets, followed by Hf Sinclair Corp. (DINO - Free Report) and Ovintiv Inc. (OVV - Free Report) .
The top 10 holdings account for about 43.7% of total assets under management.
Performance and Risk
The ETF has gained about 4.55% and is down about -2.16% so far this year and in the past one year (as of 10/27/2023), respectively. FXN has traded between $14.30 and $19.40 during this last 52-week period.
The fund has a beta of 1.80 and standard deviation of 33.87% for the trailing three-year period, which makes FXN a high risk choice in this particular space. With about 40 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Energy AlphaDEX ETF is an excellent option for investors seeking to outperform the Energy ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
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 $8.30 billion in assets, Energy Select Sector SPDR ETF has $38.87 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?
Launched on 05/08/2007, the First Trust Energy AlphaDEX ETF (FXN - Free Report) is a smart beta exchange traded fund offering broad exposure to the Energy ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
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.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
FXN is managed by First Trust Advisors, and this fund has amassed over $665.23 million, 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for this ETF are 0.61%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 3.05%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
For FXN, it has heaviest allocation in the Energy sector --about 98.30% of the portfolio.
When you look at individual holdings, Chevron Corporation (CVX - Free Report) accounts for about 7.07% of the fund's total assets, followed by Hf Sinclair Corp. (DINO - Free Report) and Ovintiv Inc. (OVV - Free Report) .
The top 10 holdings account for about 43.7% of total assets under management.
Performance and Risk
The ETF has gained about 4.55% and is down about -2.16% so far this year and in the past one year (as of 10/27/2023), respectively. FXN has traded between $14.30 and $19.40 during this last 52-week period.
The fund has a beta of 1.80 and standard deviation of 33.87% for the trailing three-year period, which makes FXN a high risk choice in this particular space. With about 40 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Energy AlphaDEX ETF is an excellent option for investors seeking to outperform the Energy ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
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 $8.30 billion in assets, Energy Select Sector SPDR ETF has $38.87 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.