We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is First Trust Industrials/Producer Durables AlphaDEX ETF (FXR) a Strong ETF Right Now?
Read MoreHide Full Article
Designed to provide broad exposure to the Industrials ETFs category of the market, the First Trust Industrials/Producer Durables AlphaDEX ETF (FXR - 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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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.
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
The fund is managed by First Trust Advisors, and has been able to amass over $1.91 billion, which makes it one of the larger ETFs in the Industrials ETFs. FXR, before fees and expenses, seeks to match the performance of the StrataQuant Industrials Index.
The StrataQuant Industrials 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.61% for FXR, making it one of the more expensive products in the space.
The fund has a 12-month trailing dividend yield of 0.68%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 71.80% of the portfolio, the fund has heaviest allocation to the Industrials sector; Materials and Financials round out the top three.
Looking at individual holdings, Allison Transmission Holdings, Inc. (ALSN - Free Report) accounts for about 1.54% of total assets, followed by Gates Industrial Corporation Plc (GTES - Free Report) and Armstrong World Industries, Inc. (AWI - Free Report) .
FXR's top 10 holdings account for about 14.36% of its total assets under management.
Performance and Risk
So far this year, FXR return is roughly 8.13%, and is up about 29.66% in the last one year (as of 04/15/2024). During this past 52-week period, the fund has traded between $53.23 and $72.96.
The fund has a beta of 1.21 and standard deviation of 20.06% for the trailing three-year period, which makes FXR a medium risk choice in this particular space. With about 134 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Industrials/Producer Durables AlphaDEX ETF is a reasonable option for investors seeking to outperform the Industrials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Industrials ETF (VIS - Free Report) tracks MSCI US Investable Market Industrials 25/50 Index and the Industrial Select Sector SPDR ETF (XLI - Free Report) tracks Industrial Select Sector Index. Vanguard Industrials ETF has $5.18 billion in assets, Industrial Select Sector SPDR ETF has $17.97 billion. VIS has an expense ratio of 0.10% and XLI 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 Industrials 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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Is First Trust Industrials/Producer Durables AlphaDEX ETF (FXR) a Strong ETF Right Now?
Designed to provide broad exposure to the Industrials ETFs category of the market, the First Trust Industrials/Producer Durables AlphaDEX ETF (FXR - 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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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.
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
The fund is managed by First Trust Advisors, and has been able to amass over $1.91 billion, which makes it one of the larger ETFs in the Industrials ETFs. FXR, before fees and expenses, seeks to match the performance of the StrataQuant Industrials Index.
The StrataQuant Industrials 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.61% for FXR, making it one of the more expensive products in the space.
The fund has a 12-month trailing dividend yield of 0.68%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 71.80% of the portfolio, the fund has heaviest allocation to the Industrials sector; Materials and Financials round out the top three.
Looking at individual holdings, Allison Transmission Holdings, Inc. (ALSN - Free Report) accounts for about 1.54% of total assets, followed by Gates Industrial Corporation Plc (GTES - Free Report) and Armstrong World Industries, Inc. (AWI - Free Report) .
FXR's top 10 holdings account for about 14.36% of its total assets under management.
Performance and Risk
So far this year, FXR return is roughly 8.13%, and is up about 29.66% in the last one year (as of 04/15/2024). During this past 52-week period, the fund has traded between $53.23 and $72.96.
The fund has a beta of 1.21 and standard deviation of 20.06% for the trailing three-year period, which makes FXR a medium risk choice in this particular space. With about 134 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Industrials/Producer Durables AlphaDEX ETF is a reasonable option for investors seeking to outperform the Industrials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Industrials ETF (VIS - Free Report) tracks MSCI US Investable Market Industrials 25/50 Index and the Industrial Select Sector SPDR ETF (XLI - Free Report) tracks Industrial Select Sector Index. Vanguard Industrials ETF has $5.18 billion in assets, Industrial Select Sector SPDR ETF has $17.97 billion. VIS has an expense ratio of 0.10% and XLI 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 Industrials 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.