First Trust Dorsey Wright Dynamic Focus 5 ETF (FVC)FVC

First Trust Dorsey Wright Dynamic Focus 5 ETF (ticker: FDS)

Profile

Overview:

FDS is an actively managed ETF that invests in large-cap US stocks. It utilizes a quantitative model developed by Dorsey Wright & Associates to select stocks with strong growth potential based on fundamental and technical analysis.

Target Sector: US large-cap equities

Asset Allocation: 100% equities

Investment Strategy: Focuses on identifying stocks with high relative strength, earnings momentum, and positive revisions to analyst estimates. The portfolio holds around 40-50 stocks, with a high turnover rate.

Objective

Primary Investment Goal: The ETF aims to outperform the S&P 500 Index over a full market cycle by investing in companies with strong growth potential.

Issuer

First Trust Advisors L.P.

Reputation and Reliability: First Trust Advisors is a reputable asset management firm with over $211 billion in assets under management. They have a strong track record of launching and managing successful ETFs.

Management: The ETF is sub-advised by Dorsey Wright & Associates, a leading provider of quantitative investment strategies. The firm has a team of experienced analysts and portfolio managers with expertise in fundamental and technical analysis.

Market Share

Market Share: FDS has a relatively small market share within the large-cap US equity ETF space. As of November 2023, its assets under management are approximately $431 million.

Total Net Assets

Total Net Assets: $431 million (as of November 2023)

Moat

Competitive Advantages:

• Unique Quantitative Model: The Dorsey Wright model leverages a combination of fundamental and technical analysis to identify stocks with strong growth potential.
• Active Management: The active management approach allows for flexibility in portfolio construction and the ability to respond quickly to changing market conditions.
• Experienced Management Team: The team at Dorsey Wright & Associates has a long and successful track record in quantitative investing.

Financial Performance

Historical Performance: FDS has outperformed the S&P 500 Index since its inception in 2010.

Benchmark Comparison: In the 10 years ending November 2023, FDS delivered an annualized return of 12.9%, compared to the S&P 500's 10.1% gain.

Growth Trajectory

Growth Trends: FDS has seen strong growth in recent years, driven by its outperformance and increasing interest in actively managed strategies.

Liquidity

Average Trading Volume: Approximately 40,000 shares per day.

Bid-Ask Spread: The average bid-ask spread is around 0.06%.

Market Dynamics

Economic Indicators: Strong economic growth and low interest rates have generally benefitted large-cap stocks.

Sector Growth Prospects: The US large-cap equity market is expected to continue to grow in the long term.

Current Market Conditions: Market volatility and rising interest rates could pose challenges for the ETF.

Competitors

• iShares Core S&P 500 ETF (IVV): 38.51% market share
• Vanguard S&P 500 ETF (VOO): 31.72% market share
• SPDR S&P 500 ETF Trust (SPY): 25.47% market share

Expense Ratio

Expense Ratio: 0.65%

Investment Approach and Strategy

Strategy: Actively managed, focuses on identifying stocks with strong growth potential using a quantitative model.

Composition: 100% US large-cap equities.

Key Points

• Actively managed ETF targeting large-cap US equities.
• Utilizes a quantitative model to identify stocks with strong growth potential.
• Has outperformed the S&P 500 Index since inception.
• Relatively small market share and high expense ratio.

Risks

• Market Volatility: The ETF is exposed to the volatility of the US stock market.
• Active Management Risk: The ETF's performance is dependent on the success of the Dorsey Wright model and the skill of the portfolio managers.
• Expense Ratio: The ETF's expense ratio is higher than some other large-cap equity ETFs.

Who Should Consider Investing

• Investors seeking long-term capital appreciation through exposure to large-cap US equities.
• Investors looking for an actively managed ETF with a quantitative approach.
• Investors who can tolerate higher volatility and expense ratios.

Fundamental Rating Based on AI

Rating: 7.5 out of 10

Rationale: FDS has a strong investment objective and a robust quantitative model. It has also delivered solid historical performance and has an experienced management team. However, the ETF has a relatively small market share, a high expense ratio, and is exposed to market volatility and active management risk.

Resources and Disclaimers

Data Sources:

• https://www.firsttrust.com/product/etfs/overview/fds
• https://finance.yahoo.com/quote/FDS/
• https://www.etf.com/etfanalytics/etf-channel-research/
• https://www.dorseywright.com/

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