The First Trust Materials AlphaDEX ETF (
FXZ Quick Quote FXZ - Free Report) was launched on 05/08/2007, and is a passively managed exchange traded fund designed to offer broad exposure to the Materials - Broad segment of the equity market.
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 14, placing it in bottom 13%.
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.56 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.
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
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 1.20%.
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 Materials sector--about 92.60% of the portfolio.
Looking at individual holdings, Reliance Steel & Aluminum Co. (
RS Quick Quote RS - Free Report) accounts for about 5.52% of total assets, followed by Steel Dynamics, Inc. ( STLD Quick Quote STLD - Free Report) and Westlake Corporation ( WLK Quick Quote WLK - Free Report) .
The top 10 holdings account for about 44.95% of total assets under management.
Performance and Risk
Year-to-date, the First Trust Materials AlphaDEX ETF return is roughly 1.99% so far, and is up about 13.93% over the last 12 months (as of 08/22/2022). FXZ has traded between $53.99 and $74.60 in this past 52-week period.
The ETF has a beta of 1.22 and standard deviation of 32.49% 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 outstanding 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 $5.88 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $7.36 billion. XLB has an expense ratio of 0.10% and GUNR charges 0.46%. Bottom Line
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