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Is First Trust Consumer Staples AlphaDEX ETF (FXG) a Strong ETF Right Now?
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Designed to provide broad exposure to the Consumer Staples ETFs category of the market, the First Trust Consumer Staples AlphaDEX ETF (FXG - Free Report) is a smart beta exchange traded fund launched on 05/08/2007.
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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $744.70 million, making it one of the average sized ETFs in the Consumer Staples ETFs. Before fees and expenses, this particular fund seeks to match the performance of the StrataQuant Consumer Staples Index.
The StrataQuant Consumer Staples 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
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 0.63% for FXG, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.84%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For FXG, it has heaviest allocation in the Consumer Staples sector --about 87.50% of the portfolio --while Healthcare and Materials round out the top three.
When you look at individual holdings, Pilgrim's Pride Corporation (PPC - Free Report) accounts for about 4.42% of the fund's total assets, followed by Tyson Foods, Inc. (class A) (TSN - Free Report) and Post Holdings, Inc. (POST - Free Report) .
FXG's top 10 holdings account for about 40.39% of its total assets under management.
Performance and Risk
The ETF has lost about -0.30% so far this year and is up roughly 2.82% in the last one year (as of 01/25/2023). In the past 52-week period, it has traded between $56.87 and $67.92.
The ETF has a beta of 0.68 and standard deviation of 19.84% for the trailing three-year period, making it a medium risk choice in the space. With about 41 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Consumer Staples AlphaDEX ETF is an excellent option for investors seeking to outperform the Consumer Staples ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Vanguard Consumer Staples ETF (VDC - Free Report) tracks MSCI US Investable Market Consumer Staples 25/50 Index and the Consumer Staples Select Sector SPDR ETF (XLP - Free Report) tracks Consumer Staples Select Sector Index. Vanguard Consumer Staples ETF has $6.66 billion in assets, Consumer Staples Select Sector SPDR ETF has $17.15 billion. VDC has an expense ratio of 0.10% and XLP 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 Consumer Staples 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 Consumer Staples AlphaDEX ETF (FXG) a Strong ETF Right Now?
Designed to provide broad exposure to the Consumer Staples ETFs category of the market, the First Trust Consumer Staples AlphaDEX ETF (FXG - Free Report) is a smart beta exchange traded fund launched on 05/08/2007.
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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $744.70 million, making it one of the average sized ETFs in the Consumer Staples ETFs. Before fees and expenses, this particular fund seeks to match the performance of the StrataQuant Consumer Staples Index.
The StrataQuant Consumer Staples 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
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 0.63% for FXG, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.84%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For FXG, it has heaviest allocation in the Consumer Staples sector --about 87.50% of the portfolio --while Healthcare and Materials round out the top three.
When you look at individual holdings, Pilgrim's Pride Corporation (PPC - Free Report) accounts for about 4.42% of the fund's total assets, followed by Tyson Foods, Inc. (class A) (TSN - Free Report) and Post Holdings, Inc. (POST - Free Report) .
FXG's top 10 holdings account for about 40.39% of its total assets under management.
Performance and Risk
The ETF has lost about -0.30% so far this year and is up roughly 2.82% in the last one year (as of 01/25/2023). In the past 52-week period, it has traded between $56.87 and $67.92.
The ETF has a beta of 0.68 and standard deviation of 19.84% for the trailing three-year period, making it a medium risk choice in the space. With about 41 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Consumer Staples AlphaDEX ETF is an excellent option for investors seeking to outperform the Consumer Staples ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Vanguard Consumer Staples ETF (VDC - Free Report) tracks MSCI US Investable Market Consumer Staples 25/50 Index and the Consumer Staples Select Sector SPDR ETF (XLP - Free Report) tracks Consumer Staples Select Sector Index. Vanguard Consumer Staples ETF has $6.66 billion in assets, Consumer Staples Select Sector SPDR ETF has $17.15 billion. VDC has an expense ratio of 0.10% and XLP 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 Consumer Staples 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.