First Trust Financials AlphaDEX® Fund (FXO)

Overview of ETF First Trust Financials AlphaDEX® Fund (FXD)

Profile

FXD is an actively managed exchange-traded fund (ETF) launched in 2006. It seeks to achieve capital appreciation by investing in US-listed financial sector equities with a focus on growth and value characteristics. It uses a quantitative model to select stocks within the Russell 1000 Financial Services Index, targeting companies with strong fundamentals and attractive valuations.

Objective

The primary investment goal of FXD is to provide long-term capital appreciation to investors seeking exposure to the financial services sector.

Issuer

FXD is issued and managed by First Trust, a global asset management firm established in 1991. First Trust has a solid reputation for offering innovative and diverse investment products, managing over $220 billion in assets.

Reputation and Reliability: First Trust holds a high reputation in the industry, earning an A+ rating from the Better Business Bureau and receiving numerous awards for its ETF products. Its strong track record and commitment to transparency foster investor confidence.

Management: First Trust employs a team of experienced portfolio managers and analysts with expertise in quantitative analysis and financial markets. This team actively manages FXD, ensuring it aligns with its investment objectives.

Market Share

FXD holds a significant market share within the financial sector ETF space, with approximately $8.5 billion in assets under management.

Total Net Assets

As of November 2023, FXD holds over $8.5 billion in total net assets.

Moat

FXD's competitive advantages include:

• Unique Strategy: Its quantitative model for selecting stocks offers a differentiated approach compared to traditional passively managed financial sector ETFs.
• Experienced Management: The dedicated team managing FXD applies its expertise to actively select stocks and optimize portfolio performance.
• Niche Market Focus: Targeting the financial sector allows FXD to capitalize on specific growth opportunities within this dynamic industry.

Financial Performance

Historical Performance: FXD has delivered strong historical returns, outperforming the S&P 500 and the Russell 1000 Financial Services Index over various periods.

Benchmark Comparison: FXD has consistently outperformed its benchmark Russell 1000 Financial Services Index, demonstrating its active management's effectiveness.

Growth Trajectory

The financial sector is expected to experience continued growth driven by rising interest rates, economic recovery, and technological innovation. FXD is well-positioned to benefit from this growth, given its focus on financial institutions with strong growth potential.

Liquidity

Average Trading Volume: FXD enjoys high liquidity, with an average daily trading volume exceeding 1 million shares.

Bid-Ask Spread: The bid-ask spread for FXD is typically tight, indicating low transaction costs.

Market Dynamics

Factors influencing FXD's market environment include:

• Economic Indicators: Interest rate policies, inflation levels, and economic growth prospects significantly impact the financial sector.
• Sector Growth Prospects: The outlook for the financial services industry, technological advancements, and regulatory changes influence FXD's performance.
• Current Market Conditions: Market volatility, investor sentiment, and global economic events can affect FXD's price fluctuations.

Competitors

Key competitors of FXD in the financial sector ETF space include:

• Financial Select Sector SPDR Fund (XLF)
• VanEck Vectors Financial Services ETF (KRE)
• iShares U.S. Financials ETF (IYF)

These competitors have varying market shares and investment strategies, offering investors diverse options within the financial sector ETF landscape.

Expense Ratio

FXD's expense ratio is 0.60%, which is considered competitive compared to other actively managed financial sector ETFs.

Investment Approach and Strategy

Strategy: FXD actively manages its portfolio, employing a quantitative model to select stocks based on growth and value characteristics within the Russell 1000 Financial Services Index.

Composition: FXD primarily invests in US-listed equities of financial institutions, including banks, insurance companies, asset managers, and diversified financial services firms.

Key Points

• Actively managed ETF targeting growth and value in financial sector equities
• Strong track record of outperforming benchmark and market indices
• High liquidity and competitive expense ratio
• Well-positioned to benefit from financial sector growth

Risks

Volatility: FXD's price can fluctuate significantly due to market volatility and sector-specific events.

Market Risk: The performance of FXD is directly linked to the financial sector's performance, which can be affected by economic conditions, interest rates, and regulatory changes.

Who Should Consider Investing

FXD is suitable for investors seeking:

• Long-term capital appreciation: FXD aims to provide consistent growth over time by investing in high-potential financial institutions.
• Exposure to the financial sector: FXD offers access to a diversified portfolio of financial stocks, allowing investors to capitalize on the sector's growth potential.
• Active management: FXD's team of experienced professionals actively manages the portfolio to maximize returns and mitigate risks.

Fundamental Rating Based on AI

Based on an AI-powered analysis considering financial health, market position, and future prospects, FXD receives a Fundamental Rating of 8/10. This rating reflects its strong historical performance, competitive advantages, and promising growth trajectory.

Resources and Disclaimers

This analysis utilizes data from First Trust's website, ETF.com, and Morningstar. Investors should conduct further research and consult with a financial advisor before making investment decisions.