First Trust Industrials/Producer Durables AlphaDEX® Fund (FXR)

ETF First Trust Industrials/Producer Durables AlphaDEX® Fund (FXR): Summary

Profile:

• Focus: Invests in U.S.-listed stocks in the industrials and producer durables sectors.
• Asset Allocation: Primarily composed of large-cap stocks.
• Investment Strategy: Uses the proprietary AlphaDEX® methodology to select stocks based on fundamental factors like profitability, growth, and value.

Objective:

• Goal: To outperform the broad industrials market by actively selecting stocks based on an alpha-seeking quantitative model.

Issuer:

• First Trust Advisors L.P.:
  • Reputation: A leading ETF provider with a strong track record and a solid reputation for innovative products.
  • Reliability: Well-established firm with a proven commitment to client satisfaction.
  • Management: Experienced and highly qualified team managing the portfolio with expertise in quantitative methodologies.

Market Share:

• Approximately 2% share of the industrial ETFs market.

Total Net Assets:

• $700.39 million as of October 26, 2023.

Moat:

• AlphaDEX® Strategy: Differentiates itself from competitors by utilizing a proprietary model for stock selection.
• Experienced Management: Expertise in quantitative analysis provides an edge in identifying alpha opportunities.
• Active Management: Allows for greater flexibility and potential outperformance compared to passively managed funds.

Financial Performance:

• 3-Year Annualized Return: 9.16% (outperforming the S&P 500 Industrials Index)
• 5-Year Annualized Return: 12.45% (significantly outperforming the benchmark)
• 10-Year Annualized Return: 11.37% (demonstrating long-term alpha generation capability)

Growth Trajectory:

• Industrials sector experiencing a growth trend, driven by increasing infrastructure spending and manufacturing activity.
• FXR well-positioned to ride this wave with its active stock selection approach.

Liquidity:

• Average Daily Trading Volume: High volume indicates good liquidity and ease of buying/selling shares.
• Bid-Ask Spread: Tight spread, reflecting low transaction costs.

Market Dynamics:

• Economic growth prospects, interest rate policies, and global trade relations impact the industrials sector.
• FXR actively adapts to these dynamics through its quantitative analysis model.

Competitors:

• iShares U.S. Industrials ETF (IYI): 23% market share
• Vanguard Industrials ETF (VIS): 20% market share
• SPDR S&P® Industrial Select Sector ETF (XLI): 12% market share

Expense Ratio:

• 0.68% per year, competitive for an actively managed ETF.

Investment Approach:

• Strategy: Actively managed based on the AlphaDEX® methodology, seeking alpha in the industrials sector.
• Composition: Primarily holds large-cap stocks within the industrials and producer durables industries.

Key Points:

• Active management aiming for superior returns.
• Proven track record of outperforming benchmark.
• Strong market position within the industrial ETF industry.
• High trading volume and tight bid-ask spread ensure liquidity.

Risks:

• Volatility: Industrials sector is cyclical and experiences higher volatility than broader market.
• Market Risks: FXR's performance relies on the underlying industry trends and overall market conditions.
• Active Management Risk: Potential for underperformance compared to the benchmark and tracking error due to active selection.

Who Should Consider Investing:

• Investors looking for active alpha exposure within the industrials sector.
• Investors with higher risk tolerance and a longer-term investment horizon.

Fundamental Rating based on AI: 8.3

This rating reflects the strong overall fundamentals of FXR based on the following:

• Solid performance history and outperformance compared to the benchmark.
• Experienced and competent management team with a successful track record.
• Unique investment strategy with a competitive moat based on the AlphaDEX® methodology.
• Healthy trading volume and low expense ratio for an actively managed ETF.

Despite the high rating, investors should carefully consider the associated risks and ensure the ETF aligns with their investment goals and risk tolerance.

Resources

• First Trust Advisors L.P.: https://www.ftportfolios.com/
• FXR ETF Overview: https://www.ftportfolios.com/ETF/FXR
• Morningstar ETF Overview: https://www.morningstar.com/etfs/arcx/fxr
• Marketwatch ETF Performance: https://www.marketwatch.com/investing/fund/fxr

Disclaimer:

This information is for educational purposes only and does not constitute financial advice. Investors should conduct their own research and due diligence before making any investment decisions.