For investors seeking momentum, First Trust Utilities AlphaDEX Fund (FXU - Free Report) is probably on radar now. The fund just hit a 52-week high and is up about 19.3% from its 52-week low price of $23.46/share.
But are more gains in store for this ETF? Let’s take a quick look at the fund and the near-term outlook on it to get a better idea on where it might be headed:
FXU in Focus
This product targets the utilities segment of the broad stock market and follows the StrataQuant Utilities Index. It has key holdings in electric utilities, multi utilities and wired-line telecommunications. The ETF charges 62 bps in annual fees (see: all the Utilities ETFs here).
Why the Move?
The utility sector has been an area to watch lately given that the steep rise in bond yields has triggered a sharp sell-off in the broad stock market that has raised the appeal of utility stocks. Being a low-beta sector, utility is relatively protected from large swings (ups and downs) in the stock market and is thus considered a defensive investment or one that is unaffected by economic cycles and politics. Additionally, utilities offer solid dividend payouts and excellent capital appreciation over the longer term.
More Gains Ahead?
Currently, FXU has a Zacks ETF Rank #4 (Sell) with a Medium risk outlook, suggesting that the outperformance is unlikely to continue in the months ahead. However, the fund seems to remain strong given a weighted alpha of 6.00% and a 20-day volatility of 13.17%. As a result, there is definitely still some promise for investors who want to ride on this surging ETF a little further.
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