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Is First Trust Energy AlphaDEX ETF (FXN) a Strong ETF Right Now?
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Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Energy AlphaDEX ETF (FXN - Free Report) provides investors broad exposure to the Energy ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.73 billion, making 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.64%.
FXN's 12-month trailing dividend yield is 1.99%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
FXN's heaviest allocation is in the Energy sector, which is about 95.10% of the portfolio.
When you look at individual holdings, Antero Resources Corporation (AR - Free Report) accounts for about 4.85% of the fund's total assets, followed by Cheniere Energy, Inc. (LNG - Free Report) and Southwestern Energy Company (SWN - Free Report) .
The top 10 holdings account for about 39.92% of total assets under management.
Performance and Risk
The ETF has gained about 36.25% and is up roughly 42.46% so far this year and in the past one year (as of 10/04/2022), respectively. FXN has traded between $11.40 and $18.74 during this last 52-week period.
The fund has a beta of 1.83 and standard deviation of 48.85% for the trailing three-year period, which makes FXN a high risk choice in this particular space. With about 41 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 $7.48 billion in assets, Energy Select Sector SPDR ETF has $35.41 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?
Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Energy AlphaDEX ETF (FXN - Free Report) provides investors broad exposure to the Energy ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.73 billion, making 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.64%.
FXN's 12-month trailing dividend yield is 1.99%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
FXN's heaviest allocation is in the Energy sector, which is about 95.10% of the portfolio.
When you look at individual holdings, Antero Resources Corporation (AR - Free Report) accounts for about 4.85% of the fund's total assets, followed by Cheniere Energy, Inc. (LNG - Free Report) and Southwestern Energy Company (SWN - Free Report) .
The top 10 holdings account for about 39.92% of total assets under management.
Performance and Risk
The ETF has gained about 36.25% and is up roughly 42.46% so far this year and in the past one year (as of 10/04/2022), respectively. FXN has traded between $11.40 and $18.74 during this last 52-week period.
The fund has a beta of 1.83 and standard deviation of 48.85% for the trailing three-year period, which makes FXN a high risk choice in this particular space. With about 41 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 $7.48 billion in assets, Energy Select Sector SPDR ETF has $35.41 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.