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Is First Trust Energy AlphaDEX ETF (FXN) a Strong ETF Right Now?
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The First Trust Energy AlphaDEX ETF (FXN - Free Report) was launched on 05/08/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Energy ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
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.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $1.59 billion, 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
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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.64%.
It has a 12-month trailing dividend yield of 1.62%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
FXN's heaviest allocation is in the Energy sector, which is about 94.60% of the portfolio.
Looking at individual holdings, Continental Resources, Inc. accounts for about 5.44% of total assets, followed by Occidental Petroleum Corporation (OXY - Free Report) and Hess Corporation (HES - Free Report) .
The top 10 holdings account for about 46.93% of total assets under management.
Performance and Risk
The ETF return is roughly 32.31% so far this year and is up about 56.47% in the last one year (as of 08/04/2022). In the past 52-week period, it has traded between $9.56 and $18.74.
FXN has a beta of 1.91 and standard deviation of 48.76% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 38 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Energy AlphaDEX ETF is an excellent option for investors seeking to outperform the Energy ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
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 $7.70 billion in assets, Energy Select Sector SPDR ETF has $34.68 billion. VDE has an expense ratio of 0.10% and XLE 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 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?
The First Trust Energy AlphaDEX ETF (FXN - Free Report) was launched on 05/08/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Energy ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
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.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $1.59 billion, 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
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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.64%.
It has a 12-month trailing dividend yield of 1.62%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
FXN's heaviest allocation is in the Energy sector, which is about 94.60% of the portfolio.
Looking at individual holdings, Continental Resources, Inc. accounts for about 5.44% of total assets, followed by Occidental Petroleum Corporation (OXY - Free Report) and Hess Corporation (HES - Free Report) .
The top 10 holdings account for about 46.93% of total assets under management.
Performance and Risk
The ETF return is roughly 32.31% so far this year and is up about 56.47% in the last one year (as of 08/04/2022). In the past 52-week period, it has traded between $9.56 and $18.74.
FXN has a beta of 1.91 and standard deviation of 48.76% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 38 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Energy AlphaDEX ETF is an excellent option for investors seeking to outperform the Energy ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
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 $7.70 billion in assets, Energy Select Sector SPDR ETF has $34.68 billion. VDE has an expense ratio of 0.10% and XLE 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 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.