We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
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 Utilities AlphaDEX ETF (FXU) a Strong ETF Right Now?
Read MoreHide Full Article
Launched on 05/08/2007, the First Trust Utilities AlphaDEX ETF (FXU - Free Report) is a smart beta exchange traded fund offering broad exposure to the Utilities/Infrastructure ETFs category of the market.
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.
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.
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
The fund is managed by First Trust Advisors. FXU has been able to amass assets over $309.95 million, making it one of the average sized ETFs in the Utilities/Infrastructure ETFs. Before fees and expenses, FXU 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
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 0.64% for FXU, making it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 2.40%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
FXU's heaviest allocation is in the Utilities sector, which is about 94.60% of the portfolio.
When you look at individual holdings, Entergy Corporation (ETR - Free Report) accounts for about 4.31% of the fund's total assets, followed by Evergy, Inc. (EVRG - Free Report) and Exelon Corporation (EXC - Free Report) .
FXU's top 10 holdings account for about 39% of its total assets under management.
Performance and Risk
The ETF return is roughly 20.48% and was up about 32.95% so far this year and in the past one year (as of 10/11/2024), respectively. FXU has traded between $28 and $38.72 during this last 52-week period.
FXU has a beta of 0.68 and standard deviation of 17.49% for the trailing three-year period, which makes the fund 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 $6.53 billion in assets, Utilities Select Sector SPDR ETF has $18.32 billion. VPU has an expense ratio of 0.10% and XLU 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 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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Is First Trust Utilities AlphaDEX ETF (FXU) a Strong ETF Right Now?
Launched on 05/08/2007, the First Trust Utilities AlphaDEX ETF (FXU - Free Report) is a smart beta exchange traded fund offering broad exposure to the Utilities/Infrastructure ETFs category of the market.
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.
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.
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
The fund is managed by First Trust Advisors. FXU has been able to amass assets over $309.95 million, making it one of the average sized ETFs in the Utilities/Infrastructure ETFs. Before fees and expenses, FXU 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
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 0.64% for FXU, making it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 2.40%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
FXU's heaviest allocation is in the Utilities sector, which is about 94.60% of the portfolio.
When you look at individual holdings, Entergy Corporation (ETR - Free Report) accounts for about 4.31% of the fund's total assets, followed by Evergy, Inc. (EVRG - Free Report) and Exelon Corporation (EXC - Free Report) .
FXU's top 10 holdings account for about 39% of its total assets under management.
Performance and Risk
The ETF return is roughly 20.48% and was up about 32.95% so far this year and in the past one year (as of 10/11/2024), respectively. FXU has traded between $28 and $38.72 during this last 52-week period.
FXU has a beta of 0.68 and standard deviation of 17.49% for the trailing three-year period, which makes the fund 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 $6.53 billion in assets, Utilities Select Sector SPDR ETF has $18.32 billion. VPU has an expense ratio of 0.10% and XLU 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 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.