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Is First Trust Consumer Staples AlphaDEX ETF (FXG) a Strong ETF Right Now?
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Designed to provide broad exposure to the Consumer Staples ETFs category of the market, the First Trust Consumer Staples AlphaDEX ETF (FXG - Free Report) is a smart beta exchange traded fund launched on 05/08/2007.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of 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
Because the fund has amassed over $434.38 million, this makes it one of the average sized ETFs in the Consumer Staples ETFs. FXG is managed by First Trust Advisors. Before fees and expenses, FXG seeks to match the performance of the StrataQuant Consumer Staples Index.
The StrataQuant Consumer Staples 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.63% for this ETF, which makes it one of the more expensive products in the space.
The fund has a 12-month trailing dividend yield of 1.39%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
FXG's heaviest allocation is in the Consumer Staples sector, which is about 87.10% of the portfolio. Its Healthcare and Materials round out the top three.
Taking into account individual holdings, Performance Food Group Company (PFGC - Free Report) accounts for about 4.56% of the fund's total assets, followed by Ingredion Incorporated (INGR - Free Report) and Mckesson Corporation (MCK - Free Report) .
The top 10 holdings account for about 40.22% of total assets under management.
Performance and Risk
The ETF has added about 1.26% so far this year and it's up approximately 3.64% in the last one year (as of 02/22/2024). In the past 52-week period, it has traded between $57.04 and $64.56.
The fund has a beta of 0.66 and standard deviation of 13.88% for the trailing three-year period, which makes FXG a medium risk choice in this particular space. With about 41 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Consumer Staples AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Staples ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Staples ETF (VDC - Free Report) tracks MSCI US Investable Market Consumer Staples 25/50 Index and the Consumer Staples Select Sector SPDR ETF (XLP - Free Report) tracks Consumer Staples Select Sector Index. Vanguard Consumer Staples ETF has $6.69 billion in assets, Consumer Staples Select Sector SPDR ETF has $14.98 billion. VDC has an expense ratio of 0.10% and XLP 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 Consumer Staples 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 Consumer Staples AlphaDEX ETF (FXG) a Strong ETF Right Now?
Designed to provide broad exposure to the Consumer Staples ETFs category of the market, the First Trust Consumer Staples AlphaDEX ETF (FXG - Free Report) is a smart beta exchange traded fund launched on 05/08/2007.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of 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
Because the fund has amassed over $434.38 million, this makes it one of the average sized ETFs in the Consumer Staples ETFs. FXG is managed by First Trust Advisors. Before fees and expenses, FXG seeks to match the performance of the StrataQuant Consumer Staples Index.
The StrataQuant Consumer Staples 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.63% for this ETF, which makes it one of the more expensive products in the space.
The fund has a 12-month trailing dividend yield of 1.39%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
FXG's heaviest allocation is in the Consumer Staples sector, which is about 87.10% of the portfolio. Its Healthcare and Materials round out the top three.
Taking into account individual holdings, Performance Food Group Company (PFGC - Free Report) accounts for about 4.56% of the fund's total assets, followed by Ingredion Incorporated (INGR - Free Report) and Mckesson Corporation (MCK - Free Report) .
The top 10 holdings account for about 40.22% of total assets under management.
Performance and Risk
The ETF has added about 1.26% so far this year and it's up approximately 3.64% in the last one year (as of 02/22/2024). In the past 52-week period, it has traded between $57.04 and $64.56.
The fund has a beta of 0.66 and standard deviation of 13.88% for the trailing three-year period, which makes FXG a medium risk choice in this particular space. With about 41 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Consumer Staples AlphaDEX ETF is a reasonable option for investors seeking to outperform the Consumer Staples ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Staples ETF (VDC - Free Report) tracks MSCI US Investable Market Consumer Staples 25/50 Index and the Consumer Staples Select Sector SPDR ETF (XLP - Free Report) tracks Consumer Staples Select Sector Index. Vanguard Consumer Staples ETF has $6.69 billion in assets, Consumer Staples Select Sector SPDR ETF has $14.98 billion. VDC has an expense ratio of 0.10% and XLP 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 Consumer Staples 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.