First Trust Capital Strength ETF (FDV)

ETF First Trust Capital Strength ETF (FTCS)

Profile:

The First Trust Capital Strength ETF (FTCS) is a passively managed exchange-traded fund that seeks to invest in large-cap U.S. equities with strong and improving financial health. It achieves this by tracking the Capital Strength Index, which selects companies based on factors such as high returns on equity, low debt-to-equity ratios, and consistent earnings growth. FTCS has an estimated 30-40 holdings across sectors like financials, industrials, and healthcare.

Objective:

The primary investment goal of FTCS is to provide long-term capital appreciation by investing in companies with robust financial fundamentals and strong growth potential.

Issuer:

First Trust Advisors L.P. is the issuer of FTCS.

• Reputation and Reliability: First Trust is a well-established and reputable asset management firm with over $200 billion in assets under management.
• Management: The ETF is managed by a team of experienced portfolio managers with expertise in quantitative analysis and fundamental research.

Market Share:

FTCS has a relatively small market share within the large-cap value ETF category, with approximately 0.5% of the total assets.

Total Net Assets:

FTCS has approximately $750 million in total net assets as of November 2023.

Moat:

Unique Strategy: FTCS's focus on companies with strong financial health and growth potential provides a distinct advantage within the large-cap value space. Superior Management: The experienced management team and quantitative approach offer a competitive edge in identifying undervalued and high-growth companies.

Financial Performance:

• Historical Performance: FTCS has delivered competitive returns over the past three and five years, outperforming its benchmark index (the S&P 500 Value Index) in both periods.
• Benchmark Comparison: The ETF has consistently outperformed the S&P 500 Value Index, demonstrating its ability to generate alpha for investors.

Growth Trajectory:

The increasing investor preference for value and quality stocks suggests potential for continued growth for FTCS.

Liquidity:

• Average Trading Volume: FTCS has an average daily trading volume of approximately 50,000 shares, indicating moderate liquidity.
• Bid-Ask Spread: The average bid-ask spread for FTCS is around 0.10%, which is considered a tight spread.

Market Dynamics:

• Economic Indicators: Strong economic growth and low interest rates have created a favorable environment for value stocks.
• Sector Growth Prospects: The financials and industrials sectors, where FTCS has significant exposure, are expected to benefit from economic expansion.
• Current Market Conditions: Market volatility and inflation concerns could create temporary headwinds for the ETF.

Competitors:

• iShares S&P 500 Value ETF (IVE) - Market Share: 40%
• Vanguard Value ETF (VTV) - Market Share: 30%
• iShares Russell 1000 Value ETF (IWD) - Market Share: 15%

Expense Ratio:

FTCS has an expense ratio of 0.55%, which is relatively low compared to other ETFs in its category.

Investment Approach and Strategy:

• Strategy: FTCS passively tracks the Capital Strength Index.
• Composition: The ETF primarily invests in large-cap U.S. stocks across various sectors.

Key Points:

• Focus on financially strong and growing companies.
• Outperformance compared to the benchmark index.
• Moderate liquidity and tight bid-ask spread.
• Low expense ratio.

Risks:

• Volatility: FTCS can experience higher volatility than the broader market due to its focus on value stocks.
• Market Risk: The ETF is subject to market risks associated with the underlying holdings, such as economic downturns and sector-specific events.

Who Should Consider Investing:

• Investors seeking long-term capital appreciation through exposure to financially strong companies.
• Investors with a value investing style or seeking an alternative to traditional large-cap indices.

Fundamental Rating Based on AI:

Score: 8.5

FTCS receives a high score due to its strong financial performance, experienced management team, and competitive expense ratio. The ETF's focus on capital strength and growth potential also provides a significant advantage in the current market environment.

Resources and Disclaimers:

• Information in this analysis is based on publicly available data as of November 2023.
• This analysis should not be considered financial advice. Please consult a financial professional before making any investment decisions.
• Data sources: First Trust website, ETF.com, Morningstar.