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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.
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.
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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other 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
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.18 billion, making it one of the larger ETFs in the Style Box - Large Cap Blend. FEX, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Large Cap Core Index.
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
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 0.59% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.57%.
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.
Representing 15.40% of the portfolio, the fund has heaviest allocation to the Industrials sector; Financials and Information Technology round out the top three.
Looking at individual holdings, Meta Platforms Inc. (class A) (META - Free Report) accounts for about 0.79% of total assets, followed by Fedex Corporation (FDX - Free Report) and Skyworks Solutions, Inc. (SWKS - Free Report) .
FEX's top 10 holdings account for about 5.71% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust Large Cap Core AlphaDEX ETF has added about 9.50% so far, and is up roughly 11.55% over the last 12 months (as of 07/26/2023). FEX has traded between $72.22 and $87.14 in this past 52-week period.
The fund has a beta of 1.07 and standard deviation of 17.67% for the trailing three-year period, which makes FEX a medium risk choice in this particular 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 $352.35 billion in assets, SPDR S&P 500 ETF has $430.54 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.
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.
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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other 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
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.18 billion, making it one of the larger ETFs in the Style Box - Large Cap Blend. FEX, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Large Cap Core Index.
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
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 0.59% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.57%.
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.
Representing 15.40% of the portfolio, the fund has heaviest allocation to the Industrials sector; Financials and Information Technology round out the top three.
Looking at individual holdings, Meta Platforms Inc. (class A) (META - Free Report) accounts for about 0.79% of total assets, followed by Fedex Corporation (FDX - Free Report) and Skyworks Solutions, Inc. (SWKS - Free Report) .
FEX's top 10 holdings account for about 5.71% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust Large Cap Core AlphaDEX ETF has added about 9.50% so far, and is up roughly 11.55% over the last 12 months (as of 07/26/2023). FEX has traded between $72.22 and $87.14 in this past 52-week period.
The fund has a beta of 1.07 and standard deviation of 17.67% for the trailing three-year period, which makes FEX a medium risk choice in this particular 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 $352.35 billion in assets, SPDR S&P 500 ETF has $430.54 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.