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Is First Trust Large Cap Core AlphaDEX ETF (FEX) a Strong ETF Right Now?
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A smart beta exchange traded fund, the First Trust Large Cap Core AlphaDEX ETF (FEX - Free Report) debuted on 05/08/2007, and offers broad exposure to the Style Box - Large Cap Blend 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Managed by First Trust Advisors, FEX has amassed assets over $1.10 billion, making it one of the larger ETFs in the Style Box - Large Cap Blend. This particular fund seeks to match the performance of the Nasdaq AlphaDEX Large Cap Core Index before fees and expenses.
The NASDAQ AlphaDEX Large Cap Core Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index.
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.
Operating expenses on an annual basis are 0.59% 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 1.65%.
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.
This ETF has heaviest allocation in the Industrials sector - about 14.20% of the portfolio. Information Technology and Financials round out the top three.
When you look at individual holdings, Celanese Corporation (CE - Free Report) accounts for about 0.50% of the fund's total assets, followed by Freeport-Mcmoran Inc. (FCX - Free Report) and Stanley Black & Decker, Inc. (SWK - Free Report) .
The top 10 holdings account for about 4.93% of total assets under management.
Performance and Risk
So far this year, FEX has lost about -2.93%, and is down about -9.86% in the last one year (as of 03/21/2023). During this past 52-week period, the fund has traded between $72.22 and $90.12.
FEX has a beta of 1.07 and standard deviation of 22.17% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 376 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Large Cap Core AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core S&P 500 ETF (IVV - Free Report) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY - Free Report) tracks S&P 500 Index. IShares Core S&P 500 ETF has $295.50 billion in assets, SPDR S&P 500 ETF has $351.50 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.
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 Blend.
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 Large Cap Core AlphaDEX ETF (FEX) a Strong ETF Right Now?
A smart beta exchange traded fund, the First Trust Large Cap Core AlphaDEX ETF (FEX - Free Report) debuted on 05/08/2007, and offers broad exposure to the Style Box - Large Cap Blend 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Managed by First Trust Advisors, FEX has amassed assets over $1.10 billion, making it one of the larger ETFs in the Style Box - Large Cap Blend. This particular fund seeks to match the performance of the Nasdaq AlphaDEX Large Cap Core Index before fees and expenses.
The NASDAQ AlphaDEX Large Cap Core Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index.
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.
Operating expenses on an annual basis are 0.59% 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 1.65%.
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.
This ETF has heaviest allocation in the Industrials sector - about 14.20% of the portfolio. Information Technology and Financials round out the top three.
When you look at individual holdings, Celanese Corporation (CE - Free Report) accounts for about 0.50% of the fund's total assets, followed by Freeport-Mcmoran Inc. (FCX - Free Report) and Stanley Black & Decker, Inc. (SWK - Free Report) .
The top 10 holdings account for about 4.93% of total assets under management.
Performance and Risk
So far this year, FEX has lost about -2.93%, and is down about -9.86% in the last one year (as of 03/21/2023). During this past 52-week period, the fund has traded between $72.22 and $90.12.
FEX has a beta of 1.07 and standard deviation of 22.17% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 376 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Large Cap Core AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core S&P 500 ETF (IVV - Free Report) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY - Free Report) tracks S&P 500 Index. IShares Core S&P 500 ETF has $295.50 billion in assets, SPDR S&P 500 ETF has $351.50 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.
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 Blend.
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.