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Is First Trust Large Cap Value AlphaDEX ETF (FTA) a Strong ETF Right Now?

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Launched on 05/08/2007, the First Trust Large Cap Value AlphaDEX ETF (FTA - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - Large Cap Value category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the 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.

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.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

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

Managed by First Trust Advisors, FTA has amassed assets over $1.29 billion, making it one of the average sized ETFs in the Style Box - Large Cap Value. FTA seeks to match the performance of the Nasdaq AlphaDEX Large Cap Value Index before fees and expenses.

The NASDAQ AlphaDEX Large Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Value Index.

Cost & Other Expenses

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.

Operating expenses on an annual basis are 0.59% for this ETF, which makes it one of the more expensive products in the space.

It has a 12-month trailing dividend yield of 2%.

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.

For FTA, it has heaviest allocation in the Financials sector --about 21.70% of the portfolio --while Industrials and Information Technology round out the top three.

Looking at individual holdings, Celanese Corporation (CE - Free Report) accounts for about 1% of total assets, followed by Paramount Global (class B) (PARA - Free Report) and Stanley Black & Decker, Inc. (SWK - Free Report) .

Its top 10 holdings account for approximately 9.77% of FTA's total assets under management.

Performance and Risk

So far this year, FTA return is roughly 7.83%, and is up about 5.58% in the last one year (as of 01/27/2023). During this past 52-week period, the fund has traded between $57.68 and $72.65.

FTA has a beta of 1.11 and standard deviation of 29.48% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 188 holdings, it effectively diversifies company-specific risk.


First Trust Large Cap Value AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell 1000 Value ETF (IWD - Free Report) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $54.29 billion in assets, Vanguard Value ETF has $101.88 billion. IWD has an expense ratio of 0.18% and VTV charges 0.04%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.

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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