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Is First Trust Materials AlphaDEX ETF (FXZ) a Strong ETF Right Now?
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Launched on 05/08/2007, the First Trust Materials AlphaDEX ETF (FXZ - Free Report) is a smart beta exchange traded fund offering broad exposure to the Materials 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FXZ has been able to amass assets over $457.77 million, making it one of the average sized ETFs in the Materials ETFs. Before fees and expenses, this particular fund seeks to match the performance of the StrataQuant Materials Index.
The StrataQuant Materials 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.
Annual operating expenses for FXZ are 0.61%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 2.20%.
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.
This ETF has heaviest allocation in the Materials sector - about 94.50% of the portfolio.
Looking at individual holdings, United States Steel Corporation (X - Free Report) accounts for about 5.92% of total assets, followed by Cf Industries Holdings, Inc. (CF - Free Report) and The Mosaic Company (MOS - Free Report) .
The top 10 holdings account for about 46.65% of total assets under management.
Performance and Risk
The ETF has lost about -0.15% so far this year and it's up approximately 4.29% in the last one year (as of 10/30/2023). In the past 52-week period, it has traded between $55.92 and $71.94.
FXZ has a beta of 1.28 and standard deviation of 25.92% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 39 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Materials AlphaDEX ETF is a reasonable option for investors seeking to outperform the Materials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Materials Select Sector SPDR ETF (XLB - Free Report) tracks Materials Select Sector Index and the FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR - Free Report) tracks Morningstar Global Upstream Natural Resources Index. Materials Select Sector SPDR ETF has $5.26 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $6.97 billion. XLB has an expense ratio of 0.10% and GUNR charges 0.46%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Materials 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 Materials AlphaDEX ETF (FXZ) a Strong ETF Right Now?
Launched on 05/08/2007, the First Trust Materials AlphaDEX ETF (FXZ - Free Report) is a smart beta exchange traded fund offering broad exposure to the Materials 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FXZ has been able to amass assets over $457.77 million, making it one of the average sized ETFs in the Materials ETFs. Before fees and expenses, this particular fund seeks to match the performance of the StrataQuant Materials Index.
The StrataQuant Materials 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.
Annual operating expenses for FXZ are 0.61%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 2.20%.
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.
This ETF has heaviest allocation in the Materials sector - about 94.50% of the portfolio.
Looking at individual holdings, United States Steel Corporation (X - Free Report) accounts for about 5.92% of total assets, followed by Cf Industries Holdings, Inc. (CF - Free Report) and The Mosaic Company (MOS - Free Report) .
The top 10 holdings account for about 46.65% of total assets under management.
Performance and Risk
The ETF has lost about -0.15% so far this year and it's up approximately 4.29% in the last one year (as of 10/30/2023). In the past 52-week period, it has traded between $55.92 and $71.94.
FXZ has a beta of 1.28 and standard deviation of 25.92% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 39 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Materials AlphaDEX ETF is a reasonable option for investors seeking to outperform the Materials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Materials Select Sector SPDR ETF (XLB - Free Report) tracks Materials Select Sector Index and the FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR - Free Report) tracks Morningstar Global Upstream Natural Resources Index. Materials Select Sector SPDR ETF has $5.26 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $6.97 billion. XLB has an expense ratio of 0.10% and GUNR charges 0.46%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Materials 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.