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Is First Trust Energy AlphaDEX ETF (FXN) a Strong ETF Right Now?
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Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Energy AlphaDEX ETF (FXN - Free Report) provides investors broad exposure to the Energy 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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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
Managed by First Trust Advisors, FXN has amassed assets over $574.72 million, making it one of the larger ETFs in the Energy ETFs. Before fees and expenses, this particular fund seeks to match the performance of the StrataQuant Energy Index.
The StrataQuant Energy 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
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 FXN are 0.61%, which makes it on par with most peer products in the space.
FXN's 12-month trailing dividend yield is 3.08%.
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.
For FXN, it has heaviest allocation in the Energy sector --about 98.10% of the portfolio.
Taking into account individual holdings, Chevron Corporation (CVX - Free Report) accounts for about 7.07% of the fund's total assets, followed by Hf Sinclair Corp. (DINO - Free Report) and Ovintiv Inc. (OVV - Free Report) .
The top 10 holdings account for about 43.7% of total assets under management.
Performance and Risk
So far this year, FXN has added roughly 1.21%, and is up about 3.08% in the last one year (as of 12/29/2023). During this past 52-week period, the fund has traded between $14.30 and $18.25.
The ETF has a beta of 1.71 and standard deviation of 31.69% for the trailing three-year period, making it a high risk choice in the space. With about 40 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Energy AlphaDEX ETF is an excellent option for investors seeking to outperform the Energy ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Vanguard Energy ETF (VDE - Free Report) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR ETF (XLE - Free Report) tracks Energy Select Sector Index. Vanguard Energy ETF has $7.92 billion in assets, Energy Select Sector SPDR ETF has $36.29 billion. VDE has an expense ratio of 0.10% and XLE 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 Energy 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 Energy AlphaDEX ETF (FXN) a Strong ETF Right Now?
Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Energy AlphaDEX ETF (FXN - Free Report) provides investors broad exposure to the Energy 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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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
Managed by First Trust Advisors, FXN has amassed assets over $574.72 million, making it one of the larger ETFs in the Energy ETFs. Before fees and expenses, this particular fund seeks to match the performance of the StrataQuant Energy Index.
The StrataQuant Energy 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
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 FXN are 0.61%, which makes it on par with most peer products in the space.
FXN's 12-month trailing dividend yield is 3.08%.
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.
For FXN, it has heaviest allocation in the Energy sector --about 98.10% of the portfolio.
Taking into account individual holdings, Chevron Corporation (CVX - Free Report) accounts for about 7.07% of the fund's total assets, followed by Hf Sinclair Corp. (DINO - Free Report) and Ovintiv Inc. (OVV - Free Report) .
The top 10 holdings account for about 43.7% of total assets under management.
Performance and Risk
So far this year, FXN has added roughly 1.21%, and is up about 3.08% in the last one year (as of 12/29/2023). During this past 52-week period, the fund has traded between $14.30 and $18.25.
The ETF has a beta of 1.71 and standard deviation of 31.69% for the trailing three-year period, making it a high risk choice in the space. With about 40 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Energy AlphaDEX ETF is an excellent option for investors seeking to outperform the Energy ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Vanguard Energy ETF (VDE - Free Report) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR ETF (XLE - Free Report) tracks Energy Select Sector Index. Vanguard Energy ETF has $7.92 billion in assets, Energy Select Sector SPDR ETF has $36.29 billion. VDE has an expense ratio of 0.10% and XLE 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 Energy 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.