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Is First Trust Health Care AlphaDEX ETF (FXH) a Strong ETF Right Now?
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Launched on 05/08/2007, the First Trust Health Care AlphaDEX ETF (FXH - Free Report) is a smart beta exchange traded fund offering broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Managed by First Trust Advisors, FXH has amassed assets over $1.55 billion, making it one of the larger ETFs in the Health Care ETFs. FXH, before fees and expenses, 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
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 FXH, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.28%.
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.
FXH's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
Looking at individual holdings, Catalent, Inc. (CTLT - Free Report) accounts for about 2.33% of total assets, followed by Hca Healthcare, Inc. (HCA - Free Report) and Insulet Corporation (PODD - Free Report) .
Its top 10 holdings account for approximately 21.6% of FXH's total assets under management.
Performance and Risk
The ETF has lost about -0.74% so far this year and is up about 1.53% in the last one year (as of 07/20/2023). In the past 52-week period, it has traded between $96.46 and $114.21.
FXH has a beta of 0.80 and standard deviation of 17.85% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 84 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 $16.93 billion in assets, Health Care Select Sector SPDR ETF has $40.89 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?
Launched on 05/08/2007, the First Trust Health Care AlphaDEX ETF (FXH - Free Report) is a smart beta exchange traded fund offering broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Managed by First Trust Advisors, FXH has amassed assets over $1.55 billion, making it one of the larger ETFs in the Health Care ETFs. FXH, before fees and expenses, 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
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 FXH, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.28%.
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.
FXH's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
Looking at individual holdings, Catalent, Inc. (CTLT - Free Report) accounts for about 2.33% of total assets, followed by Hca Healthcare, Inc. (HCA - Free Report) and Insulet Corporation (PODD - Free Report) .
Its top 10 holdings account for approximately 21.6% of FXH's total assets under management.
Performance and Risk
The ETF has lost about -0.74% so far this year and is up about 1.53% in the last one year (as of 07/20/2023). In the past 52-week period, it has traded between $96.46 and $114.21.
FXH has a beta of 0.80 and standard deviation of 17.85% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 84 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 $16.93 billion in assets, Health Care Select Sector SPDR ETF has $40.89 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.