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Is First Trust Industrials/Producer Durables AlphaDEX ETF (FXR) a Strong ETF Right Now?
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The First Trust Industrials/Producer Durables AlphaDEX ETF (FXR - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Industrials ETFs 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.
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.
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.
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 $1.74 billion, which makes it one of the larger ETFs in the Industrials ETFs. This particular fund, before fees and expenses, seeks to match the performance of the StrataQuant Industrials Index.
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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With one of the more expensive products in the space, this ETF has annual operating expenses of 0.61%.
It has a 12-month trailing dividend yield of 0.75%.
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.
For FXR, it has heaviest allocation in the Industrials sector --about 69.80% of the portfolio --while Materials and Financials round out the top three.
Looking at individual holdings, Builders Firstsource, Inc. (BLDR - Free Report) accounts for about 1.91% of total assets, followed by Louisiana-Pacific Corporation (LPX - Free Report) and Owens Corning (OC - Free Report) .
Its top 10 holdings account for approximately 15.57% of FXR's total assets under management.
Performance and Risk
Year-to-date, the First Trust Industrials/Producer Durables AlphaDEX ETF has gained about 18.69% so far, and is up about 13.44% over the last 12 months (as of 08/11/2023). FXR has traded between $45.72 and $62.05 in this past 52-week period.
FXR has a beta of 1.24 and standard deviation of 21.01% for the trailing three-year period, which makes the fund a medium risk choice in the 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 $4.49 billion in assets, Industrial Select Sector SPDR ETF has $16.03 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?
The First Trust Industrials/Producer Durables AlphaDEX ETF (FXR - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Industrials ETFs 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.
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.
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.
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 $1.74 billion, which makes it one of the larger ETFs in the Industrials ETFs. This particular fund, before fees and expenses, seeks to match the performance of the StrataQuant Industrials Index.
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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With one of the more expensive products in the space, this ETF has annual operating expenses of 0.61%.
It has a 12-month trailing dividend yield of 0.75%.
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.
For FXR, it has heaviest allocation in the Industrials sector --about 69.80% of the portfolio --while Materials and Financials round out the top three.
Looking at individual holdings, Builders Firstsource, Inc. (BLDR - Free Report) accounts for about 1.91% of total assets, followed by Louisiana-Pacific Corporation (LPX - Free Report) and Owens Corning (OC - Free Report) .
Its top 10 holdings account for approximately 15.57% of FXR's total assets under management.
Performance and Risk
Year-to-date, the First Trust Industrials/Producer Durables AlphaDEX ETF has gained about 18.69% so far, and is up about 13.44% over the last 12 months (as of 08/11/2023). FXR has traded between $45.72 and $62.05 in this past 52-week period.
FXR has a beta of 1.24 and standard deviation of 21.01% for the trailing three-year period, which makes the fund a medium risk choice in the 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 $4.49 billion in assets, Industrial Select Sector SPDR ETF has $16.03 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.