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Is First Trust Capital Strength ETF (FTCS) a Strong ETF Right Now?

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The First Trust Capital Strength ETF (FTCS) made its debut on 07/06/2006, 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.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

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.

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

Because the fund has amassed over $8.32 billion, this makes it one of the largest ETFs in the Style Box - Large Cap Blend. FTCS is managed by First Trust Advisors. This particular fund, before fees and expenses, seeks to match the performance of the The Capital Strength Index.

The Capital Strength Index is an equal-dollar weighted index which provides exposure to well-capitalized companies with strong market positions based on strong balance sheets, high degree of liquidity, ability to generate earnings growth & record financial strength & profit growth.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for FTCS are 0.56%, which makes it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.07%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Consumer Staples sector - about 19.90% of the portfolio. Industrials and Financials round out the top three.

Taking into account individual holdings, Agilent Technologies, Inc. (A) accounts for about 2.28% of the fund's total assets, followed by Garmin Ltd. (GRMN) and Keysight Technologies, Inc. (KEYS).

Performance and Risk

So far this year, FTCS has added roughly 15.75%, and it's up approximately 17.10% in the last one year (as of 10/14/2021). During this past 52-week period, the fund has traded between $60.98 and $79.92.

FTCS has a beta of 0.90 and standard deviation of 21.02% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 51 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Capital Strength ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.

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 $291.43 billion in assets, SPDR S&P 500 ETF has $388.53 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.

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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First Trust Capital Strength ETF (FTCS): ETF Research Reports
 
Garmin Ltd. (GRMN) : Free Stock Analysis Report
 
Agilent Technologies, Inc. (A) : Free Stock Analysis Report
 
SPDR S&P 500 ETF (SPY): ETF Research Reports
 
Keysight Technologies Inc. (KEYS) : Free Stock Analysis Report
 
iShares Core S&P 500 ETF (IVV): ETF Research Reports
 
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