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Should You Invest in the First Trust Health Care AlphaDEX ETF (FXH)?

Sector ETF report for FXH

By
This story originally appeared on Zacks

Designed to provide broad exposure to the Healthcare - Broad segment of the equity market, the First Trust Health Care AlphaDEX ETF (FXH) is a passively managed exchange traded fund launched on 05/08/2007.

- Zacks

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 10, placing it in bottom 38%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $1.57 billion, making it one of the larger ETFs attempting to match the performance of the Healthcare - Broad segment of the equity market. FXH seeks to match the performance of the StrataQuant Health Care Index before fees and expenses.

The StrataQuant Health Care Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.61%, making it one of the more expensive products in the space.

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.

This ETF has heaviest allocation in the Healthcare sector--about 100% of the portfolio.

Looking at individual holdings, Cigna Corporation (CI) accounts for about 2.03% of total assets, followed by Molina Healthcare, Inc. (MOH) and Hca Healthcare, Inc. (HCA).

The top 10 holdings account for about 19.77% of total assets under management.

Performance and Risk

Year-to-date, the First Trust Health Care AlphaDEX ETF has gained about 12.05% so far, and is up roughly 22.57% over the last 12 months (as of 10/22/2021). FXH has traded between $95.38 and $128.11 in this past 52-week period.

The ETF has a beta of 0.87 and standard deviation of 23.58% for the trailing three-year period, making it a medium risk choice in the space. With about 88 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Health Care AlphaDEX ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FXH is an outstanding option for investors seeking exposure to the Health Care ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Vanguard Health Care ETF (VHT) tracks MSCI US Investable Market Health Care 25/50 Index and the Health Care Select Sector SPDR ETF (XLV) tracks Health Care Select Sector Index. Vanguard Health Care ETF has $16.44 billion in assets, Health Care Select Sector SPDR ETF has $30.41 billion. VHT has an expense ratio of 0.10% and XLV charges 0.12%.

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.



Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

 

First Trust Health Care AlphaDEX ETF (FXH): ETF Research Reports

 

Molina Healthcare, Inc (MOH): Free Stock Analysis Report

 

Cigna Corporation (CI): Free Stock Analysis Report

 

HCA Healthcare, Inc. (HCA): Free Stock Analysis Report

 

Health Care Select Sector SPDR ETF (XLV): ETF Research Reports

 

Vanguard Health Care ETF (VHT): ETF Research Reports

 

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