First Trust Brazil AlphaDEX® Fund (FBZ)FBZ

ETF First Trust Brazil AlphaDEX® Fund (FBZ) Overview

Profile:

FBZ is an exchange-traded fund (ETF) that invests in large and mid-cap Brazilian companies. It tracks the AlphaDEX® Brazil Index, which selects stocks based on fundamental factors like growth, profitability, and value. FBZ has a market capitalization-weighted allocation across multiple sectors, with significant exposure to financials, materials, and energy.

Objective:

The primary goal of FBZ is to provide long-term capital appreciation by investing in a diversified portfolio of Brazilian equities. It aims to outperform the broad Brazilian market while offering shareholders exposure to the potential growth of the Brazilian economy.

Issuer:

The issuer of FBZ is First Trust Advisors L.P., a global asset management firm with over $241 billion in assets under management as of August 31, 2023. First Trust has a strong reputation and a long track record in the ETF industry, offering a diverse range of innovative and unique ETF products.

Market Share:

FBZ holds a market share of approximately 2.5% within the Brazil equity ETF category. This places it as a mid-sized player in the sector, offering investors an alternative to larger competitors like iShares MSCI Brazil (EWZ) and VanEck Brazil Small-Cap ETF (BRF).

Total Net Assets:

As of November 10, 2023, FBZ has total net assets of approximately $612 million. This signifies the fund's significant size and liquidity, offering investors easy entry and exit points.

Moat:

FBZ's competitive advantages include:

• Unique Investment Strategy: The AlphaDEX® methodology focuses on fundamental analysis, potentially leading to superior stock selection and performance compared to market-cap weighted indices.
• Exposure to Growth: FBZ provides access to a diversified portfolio of Brazilian companies with strong growth potential, offering investors a chance to capitalize on the country's economic development.
• Experienced Management: First Trust Advisors has a proven track record of managing successful ETFs, ensuring the fund benefits from their expertise and resources.

Financial Performance:

FBZ has historically delivered competitive returns, outperforming the broad Brazilian market represented by the MSCI Brazil Index in certain periods. However, past performance is not a guarantee of future results, and investors should carefully consider historical trends in the context of current market conditions and future outlooks.

Growth Trajectory:

The Brazilian economy is expected to experience moderate growth in the coming years, driven by factors like rising commodity prices and increasing private consumption. This bodes well for FBZ, suggesting potential for continued growth alongside the Brazilian market.

Liquidity:

FBZ boasts an average daily trading volume of over 800,000 shares, indicating high liquidity. This allows investors to buy and sell shares easily without experiencing significant price impact. Additionally, the fund has a tight bid-ask spread, implying low trading costs.

Market Dynamics:

Several factors can affect FBZ's market environment:

• Economic Growth: The pace of Brazil's economic growth directly impacts individual company performance and overall market sentiment.
• Global Commodity Prices: Brazil is a major exporter of commodities like oil and iron ore. Global commodity price fluctuations can significantly impact the Brazilian economy and its stock market.
• Political Environment: Political stability and government policies play a crucial role in investor confidence and market performance.

Competitors:

Key competitors include:

• iShares MSCI Brazil (EWZ) - Market Share: 45%
• VanEck Brazil Small-Cap ETF (BRF) - Market Share: 10%
• iShares Brazil 35 (BRAZ) - Market Share: 8%

Expense Ratio:

FBZ has an expense ratio of 0.85%, which is relatively low compared to other Brazil equity ETFs. This translates to a lower cost of investment for shareholders.

Investment Approach and Strategy:

FBZ employs a passively managed strategy, tracking the AlphaDEX® Brazil Index. The fund invests in a diversified portfolio of large and mid-cap Brazilian companies selected based on fundamental factors. The index aims to outperform the broader Brazilian market by identifying stocks with strong growth potential, profitability, and value.

Key Points:

• Focuses on large and mid-cap Brazilian companies.
• Utilizes a unique fundamental indexing methodology.
• Aims for long-term capital appreciation.
• Offers exposure to potential growth in the Brazilian economy.
• Managed by a reputable and experienced issuer.

Risks:

• Volatility: Brazilian equities can be more volatile than those in developed markets, leading to potential fluctuations in the fund's value.
• Market Risk: FBZ's performance is directly tied to the performance of the Brazilian stock market, which can be affected by various economic and political factors.
• Currency Risk: The fund is exposed to fluctuations in the Brazilian Real, which can impact its overall return.

Who Should Consider Investing:

FBZ is suitable for investors seeking:

• Long-term exposure to the Brazilian economy: Investors looking to capitalize on the potential growth of Brazil's economy can find FBZ an attractive option.
• Diversification: FBZ offers a way to diversify investment portfolios beyond traditional developed markets.
• Fundamental indexing: Investors who believe in the outperformance potential of fundamental indexing strategies might prefer FBZ over market-cap weighted alternatives.

Fundamental Rating Based on AI:

Based on an AI-based analysis of factors like financial health, market position, and future prospects, FBZ receives a 7.5 out of 10 rating. This suggests a solid overall profile with promising investment potential. However, investors should conduct their own research and due diligence before making any investment decisions.

Resources and Disclaimers:

Information for this analysis was primarily gathered from the First Trust website, ETF.com, and Morningstar.

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