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Is First Trust Health Care AlphaDEX ETF (FXH) a Strong ETF Right Now?
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The First Trust Health Care AlphaDEX ETF (FXH - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Health Care 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 offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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
FXH is managed by First Trust Advisors, and this fund has amassed over $1.59 billion, which makes it one of the larger ETFs in the Health Care ETFs. Before fees and expenses, this particular fund seeks to match the performance of the StrataQuant Health Care Index.
The StrataQuant Health Care Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.61% for this ETF, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.20%.
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.
For FXH, it has heaviest allocation in the Healthcare sector --about 100% of the portfolio.
Looking at individual holdings, Molina Healthcare, Inc. (MOH - Free Report) accounts for about 2.33% of total assets, followed by Moderna, Inc. (MRNA - Free Report) and Sarepta Therapeutics, Inc. (SRPT - Free Report) .
The top 10 holdings account for about 21.59% of total assets under management.
Performance and Risk
The ETF has gained about 0.75% so far this year and is down about -5.43% in the last one year (as of 01/09/2023). In the past 52-week period, it has traded between $96.46 and $118.61.
The fund has a beta of 0.81 and standard deviation of 24.10% for the trailing three-year period, which makes FXH a medium risk choice in this particular space. With about 83 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Health Care AlphaDEX ETF is a reasonable option for investors seeking to outperform the Health Care ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Health Care ETF (VHT - Free Report) tracks MSCI US Investable Market Health Care 25/50 Index and the Health Care Select Sector SPDR ETF (XLV - Free Report) tracks Health Care Select Sector Index. Vanguard Health Care ETF has $17.26 billion in assets, Health Care Select Sector SPDR ETF has $41.95 billion. VHT has an expense ratio of 0.10% and XLV 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 Health Care 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 Health Care AlphaDEX ETF (FXH) a Strong ETF Right Now?
The First Trust Health Care AlphaDEX ETF (FXH - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Health Care 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 offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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
FXH is managed by First Trust Advisors, and this fund has amassed over $1.59 billion, which makes it one of the larger ETFs in the Health Care ETFs. Before fees and expenses, this particular fund seeks to match the performance of the StrataQuant Health Care Index.
The StrataQuant Health Care Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.61% for this ETF, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.20%.
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.
For FXH, it has heaviest allocation in the Healthcare sector --about 100% of the portfolio.
Looking at individual holdings, Molina Healthcare, Inc. (MOH - Free Report) accounts for about 2.33% of total assets, followed by Moderna, Inc. (MRNA - Free Report) and Sarepta Therapeutics, Inc. (SRPT - Free Report) .
The top 10 holdings account for about 21.59% of total assets under management.
Performance and Risk
The ETF has gained about 0.75% so far this year and is down about -5.43% in the last one year (as of 01/09/2023). In the past 52-week period, it has traded between $96.46 and $118.61.
The fund has a beta of 0.81 and standard deviation of 24.10% for the trailing three-year period, which makes FXH a medium risk choice in this particular space. With about 83 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Health Care AlphaDEX ETF is a reasonable option for investors seeking to outperform the Health Care ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Health Care ETF (VHT - Free Report) tracks MSCI US Investable Market Health Care 25/50 Index and the Health Care Select Sector SPDR ETF (XLV - Free Report) tracks Health Care Select Sector Index. Vanguard Health Care ETF has $17.26 billion in assets, Health Care Select Sector SPDR ETF has $41.95 billion. VHT has an expense ratio of 0.10% and XLV 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 Health Care 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.