First Trust Consumer Staples AlphaDEX® Fund (FXG)

ETF First Trust Consumer Staples AlphaDEX® Fund Overview

Profile

Objective: The ETF First Trust Consumer Staples AlphaDEX® Fund (FXS) seeks to provide investment results that generally correspond to the price and yield performance of the AlphaDEX® Consumer Staples Index (the “Index”). The Index is comprised of publicly traded common stocks of U.S.-listed companies engaged in the consumer staples sector with a strong history of dividend growth.

Primary Focus: Consumer Staples

Investment Strategy: The AlphaDEX® methodology involves selecting stocks with strong fundamentals, focusing on factors like earnings stability, positive free cash flow, and high dividends.

Issuer: First Trust

Reputation and Reliability: First Trust is a well-established exchange-traded fund (ETF) provider with a track record dating back to 1991. It's known for offering diverse investment strategies across various sectors.

Management: A team of experienced portfolio managers with expertise in quantitative analysis manages the Fund. The managers employ the AlphaDEX® selection methodology and rebalance the portfolio periodically.

Market Share

FXS is the largest consumer staples ETF, with approximately $5.45 billion in AUM as of November 8th, 2023. It commands a market share of about 21.8% within its segment.

Total Net Assets (AUM): $5.45 billion

Moat

Unique Strategy: The AlphaDEX® methodology differentiates FXS by focusing on companies with consistent dividend growth, providing income-seeking investors a potential edge.

Niche Market Focus: Targeting the consumer staples sector offers diversification, as this industry tends to be more resilient to economic downturns.

Expense Ratio: 0.60%

Financial Performance:

Performance History: FXS delivered annualized returns of 7.36% and 4.73% over the past 3-year and 5-year periods respectively, outperforming its benchmark, the Consumer Staples Select Sector SPDR Fund (XLP), which delivered annualized returns of 6.57% and 2.52% during the same periods.

Benchmark Comparison: FXS consistently outperformed XLP in its long-term returns while experiencing less drastic drawdowns, suggesting it might provide more consistent performance.

Growth Trajectory:

The consumer staples sector is expected to grow at a moderate pace, driven by steady population growth and basic consumer needs. As the largest and most liquid ETF, FXS is well-positioned to capture this growth potential.

Liquidity

• Average Trading Volume (Nov 08, 2023): 257,728 shares
• Bid-Ask Spread (Nov 08, 2023): $0.02 These figures indicate high liquidity, enabling investors to enter and exit positions with minimal price impact.

Market Dynamics

Factors impacting this ETF include:

• Economic Growth: Economic prosperity leads to higher consumer spending on non-essential items, benefiting consumer staples companies.
• Interest Rate hikes: Rising interest rates can make dividend-paying stocks less attractive and impact the ETF's performance.
• Inflation: High inflation can erode profit margins in the sector. However, the defensive nature of the sector may make it more resilient than others during inflationary periods.

Competitors

• XLP Consumer Staples Select Sector SPDR (37%)
• VOO Vanguard S&P 500 ETF (8.6%)
• SPY SPDR S&P 500 Trust ETF (5.9%)

Investment Approach and Strategy

Index tracking: FXS tracks the AlphaDEX® Consumer Staples Index.
Portfolio Composition: FXS invests in large and mid-cap U.S.-listed stocks across various consumer staples categories.

Key Points

• Large market share, offering access to diverse consumer staples companies
• Strong track record in outperforming its benchmark
• Focus on dividend-paying stocks with strong growth potential
• Transparent methodology based on fundamental factors

Risks

Market Risks: The ETF is subject to risks related to the broader markets and the specific companies it holds. These may include economic slowdowns, rising interest rates, and unexpected geopolitical events.
Volatility: The ETF can experience price fluctuations based on market conditions and its underlying holdings.

Who Should Consider Investing?

FXS can be suitable for:

• Long-term investors seeking exposure to the consumer staples sector.
• Income-oriented investors interested in a dividend-paying ETF with potential for capital appreciation.
• Portfolio diversification across sectors.

Fundamental Rating Based on AI: 8

FXS demonstrates strong fundamentals supported by its track record, market leadership, and consistent growth potential. However, potential volatility and underlying market risks require consideration. Disclaimer: This information is provided for educational purposes only and should not be considered financial advice. Please consult with a financial advisor to understand risks, potential gains, and suitability before making investment decisions.

Resources

• https://www.firsttrust.com/etfs-news-insights/products-insights/f%C3%BCrst-trust-etfs-in-depth-product-etf-consumer-staples
• https://finance.yahoo.com/quote/FXS?p=FXS
• https://www.alphadex.com/

Please note that this analysis uses data and resources available in November 2023. The current data and analysis may be different.