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Is First Trust Utilities AlphaDEX ETF (FXU) a Strong ETF Right Now?
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A smart beta exchange traded fund, the First Trust Utilities AlphaDEX ETF (FXU - Free Report) debuted on 05/08/2007, and offers broad exposure to the Utilities/Infrastructure 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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer 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.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $226.29 million, this makes it one of the average sized ETFs in the Utilities/Infrastructure ETFs. FXU is managed by First Trust Advisors. This particular fund, before fees and expenses, seeks to match the performance of the StrataQuant Utilities Index.
The StrataQuant Utilities 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Operating expenses on an annual basis are 0.64% for this ETF, which makes it one of the most expensive products in the space.
FXU's 12-month trailing dividend yield is 2.70%.
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.
Representing 88.90% of the portfolio, the fund has heaviest allocation to the Utilities sector; Industrials and Energy round out the top three.
When you look at individual holdings, Vistra Corp. (VST - Free Report) accounts for about 4.37% of the fund's total assets, followed by Public Service Enterprise Group Incorporated (PEG - Free Report) and Hawaiian Electric Industries, Inc. (HE - Free Report) .
FXU's top 10 holdings account for about 39.66% of its total assets under management.
Performance and Risk
The ETF has lost about -6.63% and is down about -8.41% so far this year and in the past one year (as of 01/25/2024), respectively. FXU has traded between $27.35 and $33.85 during this last 52-week period.
The ETF has a beta of 0.66 and standard deviation of 17.56% for the trailing three-year period, making it a medium risk choice in the space. With about 41 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Utilities AlphaDEX ETF is not a suitable option for investors seeking to outperform the Utilities/Infrastructure ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
Vanguard Utilities ETF (VPU - Free Report) tracks MSCI US Investable Market Utilities 25/50 Index and the Utilities Select Sector SPDR ETF (XLU - Free Report) tracks Utilities Select Sector Index. Vanguard Utilities ETF has $4.52 billion in assets, Utilities Select Sector SPDR ETF has $13.54 billion. VPU has an expense ratio of 0.10% and XLU 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 Utilities/Infrastructure 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 Utilities AlphaDEX ETF (FXU) a Strong ETF Right Now?
A smart beta exchange traded fund, the First Trust Utilities AlphaDEX ETF (FXU - Free Report) debuted on 05/08/2007, and offers broad exposure to the Utilities/Infrastructure 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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer 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.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $226.29 million, this makes it one of the average sized ETFs in the Utilities/Infrastructure ETFs. FXU is managed by First Trust Advisors. This particular fund, before fees and expenses, seeks to match the performance of the StrataQuant Utilities Index.
The StrataQuant Utilities 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Operating expenses on an annual basis are 0.64% for this ETF, which makes it one of the most expensive products in the space.
FXU's 12-month trailing dividend yield is 2.70%.
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.
Representing 88.90% of the portfolio, the fund has heaviest allocation to the Utilities sector; Industrials and Energy round out the top three.
When you look at individual holdings, Vistra Corp. (VST - Free Report) accounts for about 4.37% of the fund's total assets, followed by Public Service Enterprise Group Incorporated (PEG - Free Report) and Hawaiian Electric Industries, Inc. (HE - Free Report) .
FXU's top 10 holdings account for about 39.66% of its total assets under management.
Performance and Risk
The ETF has lost about -6.63% and is down about -8.41% so far this year and in the past one year (as of 01/25/2024), respectively. FXU has traded between $27.35 and $33.85 during this last 52-week period.
The ETF has a beta of 0.66 and standard deviation of 17.56% for the trailing three-year period, making it a medium risk choice in the space. With about 41 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Utilities AlphaDEX ETF is not a suitable option for investors seeking to outperform the Utilities/Infrastructure ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
Vanguard Utilities ETF (VPU - Free Report) tracks MSCI US Investable Market Utilities 25/50 Index and the Utilities Select Sector SPDR ETF (XLU - Free Report) tracks Utilities Select Sector Index. Vanguard Utilities ETF has $4.52 billion in assets, Utilities Select Sector SPDR ETF has $13.54 billion. VPU has an expense ratio of 0.10% and XLU 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 Utilities/Infrastructure 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.