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Is First Trust Energy AlphaDEX ETF (FXN) a Strong ETF Right Now?
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Designed to provide broad exposure to the Energy ETFs category of the market, the First Trust Energy AlphaDEX ETF (FXN - 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.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
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
FXN is managed by First Trust Advisors, and this fund has amassed over $413.60 million, which makes it one of the larger ETFs in the Energy ETFs. Before fees and expenses, this particular fund seeks to match the performance of the StrataQuant Energy Index.
The StrataQuant Energy 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 0.62% for FXN, making it on par with most peer products in the space.
FXN's 12-month trailing dividend yield is 2.59%.
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.
Representing 99.10% of the portfolio, the fund has heaviest allocation to the Energy sector.
Looking at individual holdings, Chesapeake Energy Corporation (CHK) accounts for about 4.51% of total assets, followed by Valero Energy Corporation (VLO - Free Report) and Ovintiv Inc. (OVV - Free Report) .
The top 10 holdings account for about 38.2% of total assets under management.
Performance and Risk
The ETF return is roughly 0.40% so far this year and is down about -5.09% in the last one year (as of 11/06/2024). In the past 52-week period, it has traded between $15.73 and $19.35.
The fund has a beta of 1.61 and standard deviation of 28.55% for the trailing three-year period, which makes FXN a high risk choice in this particular space. With about 41 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Energy AlphaDEX ETF is a reasonable option for investors seeking to outperform the Energy ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Energy ETF (VDE - Free Report) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR ETF (XLE - Free Report) tracks Energy Select Sector Index. Vanguard Energy ETF has $7.93 billion in assets, Energy Select Sector SPDR ETF has $35.58 billion. VDE has an expense ratio of 0.10% and XLE 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 Energy 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 Energy AlphaDEX ETF (FXN) a Strong ETF Right Now?
Designed to provide broad exposure to the Energy ETFs category of the market, the First Trust Energy AlphaDEX ETF (FXN - 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.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
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
FXN is managed by First Trust Advisors, and this fund has amassed over $413.60 million, which makes it one of the larger ETFs in the Energy ETFs. Before fees and expenses, this particular fund seeks to match the performance of the StrataQuant Energy Index.
The StrataQuant Energy 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 0.62% for FXN, making it on par with most peer products in the space.
FXN's 12-month trailing dividend yield is 2.59%.
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.
Representing 99.10% of the portfolio, the fund has heaviest allocation to the Energy sector.
Looking at individual holdings, Chesapeake Energy Corporation (CHK) accounts for about 4.51% of total assets, followed by Valero Energy Corporation (VLO - Free Report) and Ovintiv Inc. (OVV - Free Report) .
The top 10 holdings account for about 38.2% of total assets under management.
Performance and Risk
The ETF return is roughly 0.40% so far this year and is down about -5.09% in the last one year (as of 11/06/2024). In the past 52-week period, it has traded between $15.73 and $19.35.
The fund has a beta of 1.61 and standard deviation of 28.55% for the trailing three-year period, which makes FXN a high risk choice in this particular space. With about 41 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Energy AlphaDEX ETF is a reasonable option for investors seeking to outperform the Energy ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Energy ETF (VDE - Free Report) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR ETF (XLE - Free Report) tracks Energy Select Sector Index. Vanguard Energy ETF has $7.93 billion in assets, Energy Select Sector SPDR ETF has $35.58 billion. VDE has an expense ratio of 0.10% and XLE 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 Energy 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.