Is First Trust Large Cap Core AlphaDEX ETF (FEX) a Strong ETF Right Now?
Smart Beta ETF report for FEX
The First Trust Large Cap Core AlphaDEX ETF (FEX) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Large Cap Blend 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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
Managed by First Trust Advisors, FEX has amassed assets over $1.21 billion, making it one of the larger ETFs in the Style Box - Large Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Large Cap Core Index.
The NASDAQ AlphaDEX Large Cap Core Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.59%.
FEX's 12-month trailing dividend yield is 0.78%.
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.
For FEX, it has heaviest allocation in the Information Technology sector --about 18.90% of the portfolio --while Financials and Healthcare round out the top three.
Looking at individual holdings, Cloudflare, Inc. (class A) (NET) accounts for about 0.68% of total assets, followed by Hubspot, Inc. (HUBS) and Pg&e Corporation (PCG).
The top 10 holdings account for about 5.01% of total assets under management.
Performance and Risk
The ETF return is roughly 26.10% and it's up approximately 39.81% so far this year and in the past one year (as of 10/27/2021), respectively. FEX has traded between $62.92 and $90.94 during this last 52-week period.
The fund has a beta of 1.13 and standard deviation of 24.67% for the trailing three-year period, which makes FEX a medium risk choice in this particular space. With about 376 holdings, it effectively diversifies company-specific risk.
First Trust Large Cap Core AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core S&P 500 ETF (IVV) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY) tracks S&P 500 Index. IShares Core S&P 500 ETF has $306.21 billion in assets, SPDR S&P 500 ETF has $411.95 billion. IVV has an expense ratio of 0.03% and SPY 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 Style Box - Large Cap Blend.
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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First Trust Large Cap Core AlphaDEX ETF (FEX): ETF Research Reports
Pacific Gas & Electric Co. (PCG): Free Stock Analysis Report
SPDR S&P 500 ETF (SPY): ETF Research Reports
HubSpot, Inc. (HUBS): Free Stock Analysis Report
iShares Core S&P 500 ETF (IVV): ETF Research Reports
Cloudflare, Inc. (NET): Free Stock Analysis Report
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