Designed to provide broad exposure to the Materials - Broad segment of the equity market, the First Trust Materials AlphaDEX ETF (
FXZ Quick Quote FXZ - Free Report) is a passively managed exchange traded fund launched on 05/08/2007.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.
Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Materials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 5, placing it in top 31%.
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.67 billion, making it one of the larger ETFs attempting to match the performance of the Materials - Broad segment of the equity market. FXZ seeks to match the performance of the StrataQuant Materials Index before fees and expenses.
The StrataQuant Materials 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 one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 1.11%.
Sector Exposure and Top Holdings
ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Materials sector--about 92.80% of the portfolio.
Looking at individual holdings, United States Steel Corporation (
X Quick Quote X - Free Report) accounts for about 6.15% of total assets, followed by Steel Dynamics, Inc. ( STLD Quick Quote STLD - Free Report) and Nucor Corporation ( NUE Quick Quote NUE - Free Report) .
The top 10 holdings account for about 48.38% of total assets under management.
Performance and Risk
The ETF has lost about -4.85% and was up about 5.90% so far this year and in the past one year (as of 06/21/2022), respectively. FXZ has traded between $53.74 and $74.60 during this last 52-week period.
The ETF has a beta of 1.16 and standard deviation of 32.35% for the trailing three-year period, making it a medium risk choice in the space. With about 38 holdings, it has more concentrated exposure than peers.
First Trust Materials AlphaDEX ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FXZ is an excellent option for investors seeking exposure to the Materials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
Materials Select Sector SPDR ETF (
XLB Quick Quote XLB - Free Report) tracks Materials Select Sector Index and the FlexShares Morningstar Global Upstream Natural Resources ETF ( GUNR Quick Quote GUNR - Free Report) tracks Morningstar Global Upstream Natural Resources Index. Materials Select Sector SPDR ETF has $6.55 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $7.95 billion. XLB has an expense ratio of 0.10% and GUNR charges 0.46%. Bottom Line
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