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Making its debut on 05/08/2007, smart beta exchange traded fund First Trust IndustrialsProducer Durables AlphaDEX ETF (FXR) provides investors broad exposure to the Industrials 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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide 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.
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
The fund is managed by First Trust Advisors. FXR has been able to amass assets over $1.89 billion, making it one of the larger ETFs in the Industrials ETFs. This particular fund seeks to match the performance of the StrataQuant Industrials Index before fees and expenses.
The StrataQuant Industrials 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 FXR are 0.64%, which makes it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 0.58%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
FXR's heaviest allocation is in the Industrials sector, which is about 65.20% of the portfolio. Its Materials and Information Technology round out the top three.
When you look at individual holdings, Generac Holdings Inc. (GNRC) accounts for about 1.40% of the fund's total assets, followed by Builders Firstsource, Inc. (BLDR) and Bill.com Holdings, Inc. (BILL).
FXR's top 10 holdings account for about 13.31% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust IndustrialsProducer Durables AlphaDEX ETF return is roughly 27.03% so far, and it's up approximately 35.34% over the last 12 months (as of 11/12/2021). FXR has traded between $46.57 and $62.61 in this past 52-week period.
FXR has a beta of 1.32 and standard deviation of 27.41% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 133 holdings, it effectively diversifies company-specific risk.
First Trust IndustrialsProducer Durables AlphaDEX ETF is an excellent option for investors seeking to outperform the Industrials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Vanguard Industrials ETF (VIS) tracks MSCI US Investable Market Industrials 25/50 Index and the Industrial Select Sector SPDR ETF (XLI) tracks Industrial Select Sector Index. Vanguard Industrials ETF has $5.58 billion in assets, Industrial Select Sector SPDR ETF has $18.37 billion. VIS has an expense ratio of 0.10% and XLI charges 0.12%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Industrials ETFs.
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 IndustrialsProducer Durables AlphaDEX ETF (FXR): ETF Research Reports
Builders FirstSource, Inc. (BLDR) : Free Stock Analysis Report
Vanguard Industrials ETF (VIS): ETF Research Reports
Industrial Select Sector SPDR ETF (XLI): ETF Research Reports
Generac Holdings Inc. (GNRC) : Free Stock Analysis Report
Bill.com Holdings, Inc. (BILL) : Free Stock Analysis Report
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