First Trust Health Care AlphaDEX® Fund (FXH)FXH

ETF First Trust Health Care AlphaDEX® Fund: A Comprehensive Overview

Profile:

The ETF First Trust Health Care AlphaDEX® Fund (FXH) seeks to deliver investment results that generally correspond, before fees and expenses, to the price and yield performance of the Health Care Select Sector Index. The fund invests at least 80% of its assets in common stocks that comprise the Index.

Objective:

The primary investment goal of FXH is to provide investors with exposure to the overall performance of the healthcare sector. It aims to achieve this by closely tracking the performance of the Health Care Select Sector Index.

Issuer:

• Name: First Trust Advisors L.P.
• Reputation and Reliability: First Trust is a well-established issuer with a long history of managing exchange-traded funds and other investment products. It has a strong reputation for quality and reliability.
• Management: The portfolio management team for FXH has extensive experience in managing healthcare-focused portfolios.

Market Share & Total Net Assets:

FXH has a market share of approximately 2.5% within the healthcare sector ETF market. As of November 17, 2023, the fund has total net assets of approximately $3.5 billion.

Moat:

• AlphaDEX® Selection Methodology: FXH employs a quantitative methodology known as AlphaDEX® to select stocks. This approach aims to identify companies with the potential for superior growth and value compared to their peers.
• Experienced Management: The fund benefits from the expertise and experience of the First Trust management team, which has a strong track record in the healthcare sector.

Financial Performance:

• Historical Performance: FXH has delivered strong historical performance, outperforming the broader market and its benchmark index in many periods.
• Benchmark Comparison: Over the past three years, FXH has outperformed the Health Care Select Sector Index by an average of 2.5% per year.

Growth Trajectory:

The healthcare sector is expected to continue growing in the coming years, driven by factors such as an aging population, rising healthcare costs, and technological advancements. This provides a positive outlook for FXH's growth trajectory.

Liquidity:

• Average Trading Volume: FXH has a high average daily trading volume, exceeding 1 million shares. This ensures good liquidity for investors looking to buy or sell shares.
• Bid-Ask Spread: The bid-ask spread for FXH is typically tight, indicating low trading costs.

Market Dynamics:

• Economic Indicators: Strong economic growth tends to benefit the healthcare sector, as consumers have more disposable income to spend on healthcare services.
• Sector Growth Prospects: The healthcare sector is expected to experience solid growth in the coming years, driven by demographic trends and technological advancements.
• Current Market Conditions: Rising interest rates and inflation can pose challenges for the healthcare sector, as they can increase costs for healthcare providers.

Competitors:

• iShares U.S. Healthcare Sector ETF ( XLV ): Market share - 15%
• Vanguard Health Care ETF ( VHT ): Market share - 10%
• SPDR S&P Health Care Sector ETF ( XLV ): Market share - 8%

Expense Ratio:

The expense ratio for FXH is 0.65%, which is considered average for healthcare sector ETFs.

Investment Approach & Strategy:

• Strategy: FXH tracks the Health Care Select Sector Index, which consists of companies in the healthcare sector.
• Composition: The fund primarily invests in common stocks of companies within the healthcare sector.

Key Points:

• Invests in leading healthcare companies.
• Employs a quantitative stock selection methodology.
• Offers strong historical performance.
• High liquidity and low trading costs.
• Provides exposure to a growing sector.

Risks:

• Volatility: The healthcare sector can be volatile, and FXH's share price may fluctuate significantly.
• Market Risk: FXH is subject to risks associated with the overall stock market and the healthcare sector specifically.

Who Should Consider Investing:

• Investors seeking exposure to the healthcare sector.
• Investors looking for a passively managed ETF with a track record of outperformance.
• Investors with a long-term investment horizon.

Fundamental Rating Based on AI: 8.5/10

FXH receives a strong rating of 8.5 based on an AI-based analysis of its fundamentals. This rating reflects the fund's strong historical performance, experienced management team, and positive growth outlook. However, investors should be aware of the potential risks associated with the healthcare sector and the overall market.

Resources and Disclaimers:

• Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial professional before making any investment decisions.
• Sources:
  • First Trust website
  • Morningstar
  • Bloomberg