Yahoo Finance Should You Invest in the First Trust Materials AlphaDEX ETF (FXZ)?
If you're interested in broad exposure to the Materials - Broad segment of the equity market, look no further than the First Trust Materials AlphaDEX ETF (FXZ), a passively managed exchange traded fund launched on 05/08/2007.
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. Materials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 4, placing it in top 25%.
Index Details
The fund is sponsored by First Trust Advisors. It has amassed assets over $421.32 million, making it one of the average sized ETFs attempting to match the performance of the Materials - Broad segment of the equity market. FXZ seeks to match the performance of the StrataQuant Materials Index before fees and expenses.
The StrataQuant Materials 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.
Costs
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 this ETF are 0.62%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.88%.
Sector Exposure and Top Holdings
ETFs offer a 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.
This ETF has heaviest allocation in the Materials sector--about 91.60% of the portfolio.
Looking at individual holdings, Steel Dynamics, Inc. (STLD) accounts for about 5.60% of total assets, followed by Nucor Corporation (NUE) and Cf Industries Holdings, Inc. (CF).
The top 10 holdings account for about 42.57% of total assets under management.
Performance and Risk
The ETF has added about 1.27% so far this year and was up about 17.56% in the last one year (as of 05/14/2024). In that past 52-week period, it has traded between $57.64 and $72.04.
The ETF has a beta of 1.25 and standard deviation of 24.63% for the trailing three-year period, making it a medium risk choice in the space. With about 40 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Materials AlphaDEX ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FXZ is a reasonable option for those seeking exposure to the Materials ETFs area of the market. Investors might also want to consider some other ETF options in the space.
Materials Select Sector SPDR ETF (XLB) tracks Materials Select Sector Index and the FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR) tracks Morningstar Global Upstream Natural Resources Index. Materials Select Sector SPDR ETF has $5.62 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $6.60 billion. XLB has an expense ratio of 0.09% and GUNR charges 0.46%.
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 Materials AlphaDEX ETF (FXZ): ETF Research Reports
Steel Dynamics, Inc. (STLD) : Free Stock Analysis Report
Nucor Corporation (NUE) : Free Stock Analysis Report
CF Industries Holdings, Inc. (CF) : Free Stock Analysis Report
Materials Select Sector SPDR ETF (XLB): ETF Research Reports
FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR): ETF Research Reports
