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Is First Trust Materials AlphaDEX ETF (FXZ) a Strong ETF Right Now?
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Designed to provide broad exposure to the Materials ETFs category of the market, the First Trust Materials AlphaDEX ETF (FXZ - Free Report) is a smart beta exchange traded fund launched on 05/08/2007.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as 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.
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, FXZ has amassed assets over $472.38 million, making it one of the average sized ETFs in the Materials ETFs. FXZ, before fees and expenses, 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.62%.
It has a 12-month trailing dividend yield of 1.97%.
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 94.40% of the portfolio, the fund has heaviest allocation to the Materials sector.
Taking into account individual holdings, United States Steel Corporation (X - Free Report) accounts for about 5.92% of the fund's 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 return is roughly 16.06% and is up about 15.19% so far this year and in the past one year (as of 01/01/2024), respectively. FXZ has traded between $57.64 and $71.94 during this last 52-week period.
The fund has a beta of 1.25 and standard deviation of 25.43% for the trailing three-year period, which makes FXZ a medium risk choice in this particular 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 $5.07 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $7 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?
Designed to provide broad exposure to the Materials ETFs category of the market, the First Trust Materials AlphaDEX ETF (FXZ - Free Report) is a smart beta exchange traded fund launched on 05/08/2007.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as 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.
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, FXZ has amassed assets over $472.38 million, making it one of the average sized ETFs in the Materials ETFs. FXZ, before fees and expenses, 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.62%.
It has a 12-month trailing dividend yield of 1.97%.
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 94.40% of the portfolio, the fund has heaviest allocation to the Materials sector.
Taking into account individual holdings, United States Steel Corporation (X - Free Report) accounts for about 5.92% of the fund's 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 return is roughly 16.06% and is up about 15.19% so far this year and in the past one year (as of 01/01/2024), respectively. FXZ has traded between $57.64 and $71.94 during this last 52-week period.
The fund has a beta of 1.25 and standard deviation of 25.43% for the trailing three-year period, which makes FXZ a medium risk choice in this particular 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 $5.07 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $7 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.