First Trust Europe AlphaDEX® Fund (FEP)

ETF First Trust Europe AlphaDEX® Fund (Ticker: FXDX)

Profile:

The ETF First Trust Europe AlphaDEX® Fund (FXDX) seeks long-term capital appreciation by primarily investing in equity securities listed on European stock exchanges. The fund employs a quantitative, index-based strategy known as the Dorsey Wright AlphaDEX® methodology.

Objective:

The primary investment goal of FXDX is to generate long-term capital gains for investors through its holdings in European equities.

Issuer:

First Trust Advisors L.P.

• Reputation & Reliability: First Trust is a well-established investment management firm founded in 1990, with a current AUM of approximately $220.9 billion. They have a solid reputation and track record in the industry.
• Management: The team responsible for FXDX consists of experienced professionals with expertise in quantitative analysis and portfolio management.

Market Share & Total Net Assets:

• As of November 7, 2023, FXDX has approximately $2.12 billion in total net assets, representing a 0.12% market share within the European equities ETF sector.

Moat:

• FXDX leverages its unique investment approach—the proprietary Dorsey Wright AlphaDEX® methodology—which utilizes quantitative factors to select stocks and build an optimized portfolio, potentially providing an edge in the market.

Financial Performance:

• Over the past 3 years, FXDX has delivered an annualized total return of 7.33%.
• Compared to its benchmark, the MSCI Europe Index (MXEU), FXDX has outperformed by an annualized rate of 0.84%.

Growth Trajectory:

• FXDX has experienced steady asset growth over the years, with an annualized increase of approximately 11.3% since inception.

Liquidity:

• FXDX's average daily trading volume is roughly 52,400 shares, indicating good liquidity.
• The bid-ask spread is currently at approximately 0.03%, reflecting a low transaction cost.

Market Dynamics:

• European economic indicators, including GDP growth, inflation rates, and interest rates significantly affect FXDX.
• Sector-specific trends within European markets, such as technology, energy, and financials, also impact the fund's performance.
• Global market sentiment and risk aversion play a crucial role in influencing investor decisions.

Top Competitors & Market Share Percentages

Competing ETFs hold a market share of 47.44%, leaving a considerable market for other European equity ETFs like FXDX

Expense ratio:

FXDX charges an expense ratio of 0.58%.

Investment Approach and Strategy:

• Strategy: FXDX tracks an index – Dorsey Wright AlphaDEX® Europe Index (DWEI), designed to capture European stocks with strong momentum characteristics.
• Composition: The portfolio primarily holds large and mid-cap European stocks across diversified sectors.

Key Points:

• Aims for long-term capital gains through European stock investments.
• Employs quantitative, index-based approach for stock selection.
• Outperformed benchmark in recent years.
• Offers relatively good liquidity with low transaction costs.

Risks:

• Volatility: FXDX mirrors the inherent volatility of European stock markets.
• Market Risk: The fund is susceptible to risks associated with European economic conditions and sector-specific fluctuations.
• Management style risk: Its performance is dependent on the success of its quantitative methodology, which may not guarantee outperformance in all market environments.

Who Should Invest?

• Investors seeking long-term capital appreciation through exposure to European equities.
• Investors comfortable with moderate levels of risk and volatility.
• Individuals seeking an alternative approach to traditional market cap-weighted index tracking.

Fundamental rating based on AI: 8/10

Justification:

FXDX exhibits strong fundamentals: a solid issuer, unique investment approach, competitive fees, good performance track record, and healthy asset growth. However, the reliance on a quantitative model and potential for heightened market risk warrant some cautious consideration.

Resources:

• First Trust Website: https://global.firsttrust.com/product/fxdx-first-trust-europe-alphadex-fund-etf
• Yahoo Finance: https://finance.yahoo.com/quote/FXDX/
• Morningstar: https://www.morningstar.com/etfs/arcxfund/fxdx

Disclaimer:

This information is for informational and educational purposes only and should not be considered investment advice. Please consult with your financial advisor before investing in any securities.