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Is First Trust Industrials/Producer Durables AlphaDEX ETF (FXR) a Strong ETF Right Now?
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A smart beta exchange traded fund, the First Trust Industrials/Producer Durables AlphaDEX ETF (FXR - Free Report) debuted on 05/08/2007, and offers 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.
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.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
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
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.66 billion, making 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.
With one of the more expensive products in the space, this ETF has annual operating expenses of 0.61%.
FXR's 12-month trailing dividend yield is 0.77%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 70.20% of the portfolio, the fund has heaviest allocation to the Industrials sector; Materials and Financials round out the top three.
When you look at individual holdings, Builders Firstsource, Inc. (BLDR - Free Report) accounts for about 1.91% of the fund's total assets, followed by Louisiana-Pacific Corporation (LPX - Free Report) and Owens Corning (OC - Free Report) .
The top 10 holdings account for about 15.57% of total assets under management.
Performance and Risk
Year-to-date, the First Trust Industrials/Producer Durables AlphaDEX ETF has added roughly 13.06% so far, and is up about 22.72% over the last 12 months (as of 10/11/2023). FXR has traded between $46.71 and $62.05 in this past 52-week period.
The ETF has a beta of 1.23 and standard deviation of 20.78% for the trailing three-year period, making it 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 $4.26 billion in assets, Industrial Select Sector SPDR ETF has $14.26 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?
A smart beta exchange traded fund, the First Trust Industrials/Producer Durables AlphaDEX ETF (FXR - Free Report) debuted on 05/08/2007, and offers 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.
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.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
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
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.66 billion, making 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.
With one of the more expensive products in the space, this ETF has annual operating expenses of 0.61%.
FXR's 12-month trailing dividend yield is 0.77%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 70.20% of the portfolio, the fund has heaviest allocation to the Industrials sector; Materials and Financials round out the top three.
When you look at individual holdings, Builders Firstsource, Inc. (BLDR - Free Report) accounts for about 1.91% of the fund's total assets, followed by Louisiana-Pacific Corporation (LPX - Free Report) and Owens Corning (OC - Free Report) .
The top 10 holdings account for about 15.57% of total assets under management.
Performance and Risk
Year-to-date, the First Trust Industrials/Producer Durables AlphaDEX ETF has added roughly 13.06% so far, and is up about 22.72% over the last 12 months (as of 10/11/2023). FXR has traded between $46.71 and $62.05 in this past 52-week period.
The ETF has a beta of 1.23 and standard deviation of 20.78% for the trailing three-year period, making it 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 $4.26 billion in assets, Industrial Select Sector SPDR ETF has $14.26 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.