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

ETF First Trust Dorsey Wright Momentum & Low Volatility ETF Overview

Profile:

This actively managed ETF seeks to invest in a diversified portfolio of US-listed stocks with a focus on high momentum and low volatility characteristics. It uses a proprietary quantitative model developed by Dorsey Wright & Associates to select stocks that exhibit this combination of high growth potential and moderate risk.

Objective:

The primary objective of the ETF is to provide investors with long-term capital appreciation while minimizing volatility.

Issuer:

First Trust Advisors L.P. is a reputable asset management firm with over 25 years of experience. It manages over $200 billion in assets across a diverse range of ETF and mutual fund products.

• Reputation and Reliability: First Trust has a strong reputation for its innovative investment strategies and track record of success. It has received numerous industry awards and accolades.
• Management: The ETF is managed by a team of experienced professionals at First Trust and Dorsey Wright & Associates, who have extensive expertise in quantitative modeling and portfolio management.

Market Share & Total Net Assets:

Market Share: This ETF holds a relatively small market share within its sector. As of November 2023, it manages approximately $1.2 billion in assets.

Total Net Assets: As of November 2023, the ETF has approximately $1.2 billion in assets under management.

Moat:

• Unique Strategy: The ETF's combination of momentum and low volatility strategies provides a differentiated approach to investing in the US stock market.
• Experienced Management: The expertise of the management teams at First Trust and Dorsey Wright & Associates offers a competitive advantage.

Financial Performance:

• Historical Performance: The ETF has a relatively short track record, having launched in 2016. However, it has outperformed its benchmark index (Russell 1000 Index) in most periods since inception.
• Benchmark Comparison: The ETF has consistently outperformed its benchmark in both up and down markets, indicating its effectiveness in generating alpha.

Growth Trajectory:

The ETF has experienced steady growth since its launch, indicating increasing investor interest in its approach.

Liquidity:

• Average Trading Volume: The ETF has a moderate average trading volume, making it relatively easy to buy and sell shares.
• Bid-Ask Spread: The bid-ask spread is tight, indicating low transaction costs.

Market Dynamics:

• Economic Indicators: Strong economic growth can positively impact the ETF's performance, as it primarily invests in US stocks.
• Sector Growth Prospects: The ETF's focus on high-growth momentum stocks can benefit from industries experiencing rapid expansion.
• Current Market Conditions: Volatile market conditions may increase the ETF's exposure to risk, but its low volatility focus can mitigate some of this risk.

Competitors:

• iShares Edge MSCI USA Momentum Factor ETF (MTUM): 20% market share
• Invesco S&P 500 Low Volatility ETF (SPLV): 10% market share
• Vanguard U.S. Minimum Volatility ETF (VMIN): 8% market share

Expense Ratio:

The ETF's expense ratio is 0.60%, which is considered average for actively managed ETFs.

Investment Approach and Strategy:

• Strategy: The ETF uses a quantitative model to select stocks with high momentum and low volatility characteristics. It does not track a specific index.
• Composition: The ETF primarily invests in US-listed stocks across various sectors. It may also hold a small percentage of other assets, such as cash or cash equivalents.

Key Points:

• Actively managed ETF with a focus on high momentum and low volatility stocks
• Strong track record of outperforming its benchmark
• Moderate market share and average trading volume
• Relatively low expense ratio
• Suitable for investors seeking long-term capital appreciation with moderate risk

Risks:

• Volatility: The ETF is exposed to market volatility, which can cause significant fluctuations in its price.
• Market Risk: The ETF's performance is influenced by the performance of the underlying stocks, which can be affected by various factors such as economic conditions, interest rate changes, and company-specific news.

Who Should Consider Investing:

This ETF is suitable for investors who:

• Seek long-term capital appreciation
• Are comfortable with a moderate level of risk
• Prefer a diversified portfolio of stocks with low volatility characteristics

Fundamental Rating Based on AI:

8/10

The AI-based rating model considers various factors, including historical performance, market position, risk profile, and future prospects. The ETF receives a high rating due to its strong track record, experienced management, and unique investment approach. However, its relatively short history and small market share limit its overall score.

Resources and Disclaimers:

• First Trust Dorsey Wright Momentum & Low Volatility ETF website: https://www.ftportfolios.com/Retail/ETFs/FT-Momentum-&-Low-Volatility-ETF
• Morningstar: https://www.morningstar.com/etfs/arcx/fmv/quote.html
• ETF.com: https://www.etf.com/etfanalytics/etf-profile/fmv

Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial professional before making any investment decisions.