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Is First Trust Utilities AlphaDEX ETF (FXU) a Strong ETF Right Now?
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Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Utilities AlphaDEX ETF (FXU - Free Report) provides investors broad exposure to the Utilities/Infrastructure ETFs category of the market.
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.
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.
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
FXU is managed by First Trust Advisors, and this fund has amassed over $204.02 million, which makes it one of the average sized ETFs in the Utilities/Infrastructure ETFs. Before fees and expenses, this particular fund 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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.64%, making it one of the most expensive products in the space.
FXU's 12-month trailing dividend yield is 2.13%.
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.
This ETF has heaviest allocation in the Utilities sector - about 94.60% of the portfolio.
When you look at individual holdings, Atmos Energy Corporation (ATO - Free Report) accounts for about 4.45% of the fund's total assets, followed by Oge Energy Corp, (OGE - Free Report) and Entergy Corporation (ETR - Free Report) .
FXU's top 10 holdings account for about 40.26% of its total assets under management.
Performance and Risk
So far this year, FXU has lost about -5.45%, and it's up approximately 10.88% in the last one year (as of 02/18/2022). During this past 52-week period, the fund has traded between $26.71 and $32.69.
The fund has a beta of 0.53 and standard deviation of 23.76% for the trailing three-year period, which makes FXU a medium risk choice in this particular space. With about 41 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Utilities AlphaDEX ETF is a reasonable option for investors seeking to outperform the Utilities/Infrastructure ETFs segment of the market. However, there are other ETFs in the space which investors could 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 $5.36 billion in assets, Utilities Select Sector SPDR ETF has $13.37 billion. VPU has an expense ratio of 0.10% and XLU 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 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.
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Is First Trust Utilities AlphaDEX ETF (FXU) a Strong ETF Right Now?
Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Utilities AlphaDEX ETF (FXU - Free Report) provides investors broad exposure to the Utilities/Infrastructure ETFs category of the market.
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.
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.
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
FXU is managed by First Trust Advisors, and this fund has amassed over $204.02 million, which makes it one of the average sized ETFs in the Utilities/Infrastructure ETFs. Before fees and expenses, this particular fund 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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.64%, making it one of the most expensive products in the space.
FXU's 12-month trailing dividend yield is 2.13%.
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.
This ETF has heaviest allocation in the Utilities sector - about 94.60% of the portfolio.
When you look at individual holdings, Atmos Energy Corporation (ATO - Free Report) accounts for about 4.45% of the fund's total assets, followed by Oge Energy Corp, (OGE - Free Report) and Entergy Corporation (ETR - Free Report) .
FXU's top 10 holdings account for about 40.26% of its total assets under management.
Performance and Risk
So far this year, FXU has lost about -5.45%, and it's up approximately 10.88% in the last one year (as of 02/18/2022). During this past 52-week period, the fund has traded between $26.71 and $32.69.
The fund has a beta of 0.53 and standard deviation of 23.76% for the trailing three-year period, which makes FXU a medium risk choice in this particular space. With about 41 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Utilities AlphaDEX ETF is a reasonable option for investors seeking to outperform the Utilities/Infrastructure ETFs segment of the market. However, there are other ETFs in the space which investors could 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 $5.36 billion in assets, Utilities Select Sector SPDR ETF has $13.37 billion. VPU has an expense ratio of 0.10% and XLU 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 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.