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Is First Trust Large Cap Core AlphaDEX ETF (FEX) a Strong ETF Right Now?
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Designed to provide broad exposure to the Style Box - Large Cap Blend category of the market, the First Trust Large Cap Core AlphaDEX ETF (FEX - Free Report) is a smart beta exchange traded fund launched on 05/08/2007.
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.
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.
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 $1.07 billion, making it one of the larger ETFs in the Style Box - Large Cap Blend. This particular fund seeks to match the performance of the Nasdaq AlphaDEX Large Cap Core Index before fees and expenses.
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.
Annual operating expenses for FEX are 0.59%, which makes it on par with most peer products in the space.
FEX's 12-month trailing dividend yield is 1.52%.
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.
FEX's heaviest allocation is in the Information Technology sector, which is about 18.60% of the portfolio. Its Industrials and Financials round out the top three.
When you look at individual holdings, Marathon Petroleum Corporation (MPC - Free Report) accounts for about 0.56% of the fund's total assets, followed by Keycorp (KEY - Free Report) and Ovintiv Inc. (OVV - Free Report) .
FEX's top 10 holdings account for about 5.27% of its total assets under management.
Performance and Risk
So far this year, FEX has added about 9.24%, and was up about 3.74% in the last one year (as of 12/05/2023). During this past 52-week period, the fund has traded between $76.64 and $87.50.
FEX has a beta of 1.07 and standard deviation of 17.29% for the trailing three-year period, which makes the fund a medium risk choice in the 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 $378.69 billion in assets, SPDR S&P 500 ETF has $436.71 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?
Designed to provide broad exposure to the Style Box - Large Cap Blend category of the market, the First Trust Large Cap Core AlphaDEX ETF (FEX - Free Report) is a smart beta exchange traded fund launched on 05/08/2007.
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.
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.
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 $1.07 billion, making it one of the larger ETFs in the Style Box - Large Cap Blend. This particular fund seeks to match the performance of the Nasdaq AlphaDEX Large Cap Core Index before fees and expenses.
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.
Annual operating expenses for FEX are 0.59%, which makes it on par with most peer products in the space.
FEX's 12-month trailing dividend yield is 1.52%.
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.
FEX's heaviest allocation is in the Information Technology sector, which is about 18.60% of the portfolio. Its Industrials and Financials round out the top three.
When you look at individual holdings, Marathon Petroleum Corporation (MPC - Free Report) accounts for about 0.56% of the fund's total assets, followed by Keycorp (KEY - Free Report) and Ovintiv Inc. (OVV - Free Report) .
FEX's top 10 holdings account for about 5.27% of its total assets under management.
Performance and Risk
So far this year, FEX has added about 9.24%, and was up about 3.74% in the last one year (as of 12/05/2023). During this past 52-week period, the fund has traded between $76.64 and $87.50.
FEX has a beta of 1.07 and standard deviation of 17.29% for the trailing three-year period, which makes the fund a medium risk choice in the 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 $378.69 billion in assets, SPDR S&P 500 ETF has $436.71 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.