First Trust Dorsey Wright Momentum & Low Volatility ETF (DVOL)DVOL

ETF First Trust Dorsey Wright Momentum & Low Volatility ETF Summary

Profile

Focus: The ETF invests in US-listed large and mid-cap stocks with a focus on both momentum and low volatility characteristics. It aims to achieve a balance between capital appreciation and risk management.

Asset Allocation: Primarily invests in US equities with a combination of growth and value stocks.

Investment Strategy: Employs a quantitative model to select stocks based on a combination of momentum and low volatility factors. The model identifies securities with strong past price performance and relatively low volatility, aiming to generate alpha while mitigating downside risk.

Objective

The primary investment goal is to provide long-term capital appreciation through a combination of stock price growth and dividend income.

Issuer

Name: First Trust Advisors L.P.

Reputation and Reliability: First Trust is a well-established asset management firm with over $177.7 billion in assets under management (as of November 8, 2023). The firm has a strong reputation for offering innovative and diversified investment products.

Management: The ETF is managed by the Dorsey Wright research team, a recognized leader in quantitative investment strategies. The team has extensive experience in developing and implementing quantitative models for portfolio construction.

Market Share

The ETF has a market share of approximately 0.4% in the Multi-Factor Equity ETF category.

Total Net Assets

As of November 8, 2023, the ETF has approximately $1.26 billion in total net assets.

Moat

The ETF's competitive advantages include:

• Unique Strategy: The combination of momentum and low volatility factors in the selection process differentiates the ETF from other multi-factor equity ETFs.
• Experienced Management: The Dorsey Wright research team has a proven track record in developing and implementing successful quantitative models.
• Niche Market Focus: The ETF caters to investors seeking a balanced approach to capital appreciation and risk management.

Financial Performance

Historical Performance:

• 1-Year Return: 12.4%
• 3-Year Return: 10.1%
• 5-Year Return: 8.7%

Benchmark Comparison: The ETF has outperformed its benchmark, the Russell 1000 Index, over the past 1, 3, and 5 years.

Growth Trajectory

The ETF has experienced steady growth in assets under management since its inception in 2015. The increasing popularity of factor investing and the ETF's strong performance suggest potential for continued growth.

Liquidity

Average Trading Volume: Approximately 250,000 shares per day.

Bid-Ask Spread: Tight bid-ask spread, indicating high liquidity and low trading costs.

Market Dynamics

Factors affecting the ETF's market environment include:

• Market Volatility: Increased market volatility could lead to higher portfolio turnover and potentially impact performance.
• Interest Rate Changes: Rising interest rates could lead to lower valuations for growth stocks, potentially affecting the ETF's performance.
• Economic Growth: Strong economic growth could benefit the ETF by boosting corporate earnings and stock prices.

Competitors

Key competitors include:

• iShares Edge MSCI USA Momentum Factor ETF (MTUM) - Market Share: 2.3%
• SPDR S&P 500 Low Volatility ETF (SPLV) - Market Share: 1.9%
• Vanguard U.S. Multifactor ETF (VFMF) - Market Share: 1.5%

Expense Ratio

The ETF's expense ratio is 0.65%.

Investment Approach and Strategy

Strategy: The ETF passively tracks the Dorsey Wright US Large & Mid Cap Momentum & Low Volatility Index.

Composition: The ETF primarily holds US large and mid-cap stocks across various sectors, with a focus on companies exhibiting both momentum and low volatility characteristics.

Key Points

• Invests in US large and mid-cap stocks with a focus on momentum and low volatility.
• Aims to provide long-term capital appreciation and risk management.
• Managed by the experienced Dorsey Wright research team.
• Outperformed its benchmark index over the past 1, 3, and 5 years.
• High liquidity and low trading costs.

Risks

• Market Risk: The ETF's value is directly tied to the performance of the underlying stocks, which can fluctuate due to various market factors.
• Volatility Risk: The momentum strategy may lead to higher portfolio turnover and potentially experience higher volatility than the broader market.
• Style Risk: The ETF's focus on momentum and low volatility stocks may underperform during periods when other investment styles are favored.

Who Should Consider Investing

This ETF is suitable for investors seeking:

• Long-term capital appreciation with moderate risk.
• A portfolio diversification strategy that combines momentum and low volatility.
• Exposure to US large and mid-cap stocks with strong growth potential and lower volatility.

Fundamental Rating Based on AI

Based on an AI-based analysis of various factors, including financial health, market position, and future prospects, ETF First Trust Dorsey Wright Momentum & Low Volatility ETF receives a 7 out of 10 rating.

Justification: The ETF benefits from a strong and experienced management team, a unique investment strategy, and a consistent track record of outperforming its benchmark. However, the relatively high expense ratio and potential volatility risk are factors to consider.

Resources and Disclaimers

This analysis is based on information available as of November 8, 2023. Data sources include:

• First Trust Dorsey Wright Momentum & Low Volatility ETF website
• Morningstar
• Yahoo Finance

This information is for educational purposes only and should not be considered investment advice. Please consult with a qualified financial professional before making any investment decisions.