Launched on 05/08/2007, the First Trust Energy AlphaDEX ETF (
FXN Quick Quote FXN - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Energy - Broad segment of the equity market.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 6, placing it in top 38%.
The fund is sponsored by First Trust Advisors. It has amassed assets over $487.87 million, making it one of the larger ETFs attempting to match the performance of the Energy - Broad segment of the equity market. FXN seeks to match the performance of the StrataQuant Energy Index before fees and expenses.
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.
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.
Annual operating expenses for this ETF are 0.64%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.79%.
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.
This ETF has heaviest allocation in the Energy sector--about 91% of the portfolio.
Looking at individual holdings, Diamondback Energy, Inc. (
FANG Quick Quote FANG - Free Report) accounts for about 4.91% of total assets, followed by Cheniere Energy, Inc. ( LNG Quick Quote LNG - Free Report) and Pioneer Natural Resources Company ( PXD Quick Quote PXD - Free Report) .
The top 10 holdings account for about 45% of total assets under management.
Performance and Risk
So far this year, FXN has added about 7.26%, and is up about 45.65% in the last one year (as of 01/14/2022). During this past 52-week period, the fund has traded between $8.33 and $13.26.
The ETF has a beta of 2.23 and standard deviation of 47.55% for the trailing three-year period, making it a high risk choice in the space. With about 37 holdings, it has more concentrated exposure than peers.
First Trust Energy AlphaDEX ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FXN is a sufficient option for those seeking exposure to the Energy ETFs area of the market. Investors might also want to consider some other ETF options in the space.
Vanguard Energy ETF (
VDE Quick Quote VDE - Free Report) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR ETF ( XLE Quick Quote XLE - Free Report) tracks Energy Select Sector Index. Vanguard Energy ETF has $6.63 billion in assets, Energy Select Sector SPDR ETF has $31.40 billion. VDE has an expense ratio of 0.10% and XLE charges 0.12%. Bottom Line
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