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Is First Trust Industrials/Producer Durables AlphaDEX ETF (FXR) a Strong ETF Right Now?
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Designed to provide broad exposure to the Industrials ETFs category of the market, the First Trust Industrials/Producer Durables AlphaDEX ETF (FXR - 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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
FXR is managed by First Trust Advisors, and this fund has amassed over $1.62 billion, which makes it one of the larger ETFs in the Industrials ETFs. FXR seeks to match the performance of the StrataQuant Industrials Index before fees and expenses.
The StrataQuant Industrials 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
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 0.61% for FXR, making it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 0.87%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
FXR's heaviest allocation is in the Industrials sector, which is about 71.90% of the portfolio. Its Materials and Financials round out the top three.
Taking into account individual holdings, Hayward Holdings, Inc. (HAYW - Free Report) accounts for about 1.63% of the fund's total assets, followed by Axon Enterprise Inc. (AXON - Free Report) and Xpo, Inc. (XPO - Free Report) .
Its top 10 holdings account for approximately 14.02% of FXR's total assets under management.
Performance and Risk
The ETF return is roughly 4.28% and is down about -5.65% so far this year and in the past one year (as of 03/29/2023), respectively. FXR has traded between $45.72 and $58.57 during this last 52-week period.
The fund has a beta of 1.23 and standard deviation of 24.39% for the trailing three-year period, which makes FXR a medium risk choice in this particular space. With about 130 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Industrials/Producer Durables AlphaDEX ETF is an excellent option for investors seeking to outperform the Industrials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Vanguard Industrials ETF (VIS - Free Report) tracks MSCI US Investable Market Industrials 25/50 Index and the Industrial Select Sector SPDR ETF (XLI - Free Report) tracks Industrial Select Sector Index. Vanguard Industrials ETF has $3.72 billion in assets, Industrial Select Sector SPDR ETF has $13.53 billion. VIS has an expense ratio of 0.10% and XLI 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 Industrials 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 Industrials/Producer Durables AlphaDEX ETF (FXR) a Strong ETF Right Now?
Designed to provide broad exposure to the Industrials ETFs category of the market, the First Trust Industrials/Producer Durables AlphaDEX ETF (FXR - 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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
FXR is managed by First Trust Advisors, and this fund has amassed over $1.62 billion, which makes it one of the larger ETFs in the Industrials ETFs. FXR seeks to match the performance of the StrataQuant Industrials Index before fees and expenses.
The StrataQuant Industrials 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
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 0.61% for FXR, making it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 0.87%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
FXR's heaviest allocation is in the Industrials sector, which is about 71.90% of the portfolio. Its Materials and Financials round out the top three.
Taking into account individual holdings, Hayward Holdings, Inc. (HAYW - Free Report) accounts for about 1.63% of the fund's total assets, followed by Axon Enterprise Inc. (AXON - Free Report) and Xpo, Inc. (XPO - Free Report) .
Its top 10 holdings account for approximately 14.02% of FXR's total assets under management.
Performance and Risk
The ETF return is roughly 4.28% and is down about -5.65% so far this year and in the past one year (as of 03/29/2023), respectively. FXR has traded between $45.72 and $58.57 during this last 52-week period.
The fund has a beta of 1.23 and standard deviation of 24.39% for the trailing three-year period, which makes FXR a medium risk choice in this particular space. With about 130 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Industrials/Producer Durables AlphaDEX ETF is an excellent option for investors seeking to outperform the Industrials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Vanguard Industrials ETF (VIS - Free Report) tracks MSCI US Investable Market Industrials 25/50 Index and the Industrial Select Sector SPDR ETF (XLI - Free Report) tracks Industrial Select Sector Index. Vanguard Industrials ETF has $3.72 billion in assets, Industrial Select Sector SPDR ETF has $13.53 billion. VIS has an expense ratio of 0.10% and XLI 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 Industrials 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.