Looking for broad exposure to the Energy - Broad segment of the equity market? You should consider the First Trust Energy AlphaDEX ETF (FXN), a passively managed exchange traded fund launched on 05/08/2007.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.
Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 11, placing it in bottom 31%.
Index Details
The fund is sponsored by First Trust Advisors. It has amassed assets over $376.04 million, making it one of the average sized ETFs attempting to match the performance of the Energy - Broad segment of the equity market. FXN seeks to match the performance of the StrataQuant Energy Index before fees and expenses.
The StrataQuant Energy Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.
Costs
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.61%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 2.57%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Energy sector--about 99.40% of the portfolio.
Looking at individual holdings, Conocophillips (COP) accounts for about 6.24% of total assets, followed by Matador Resources Company (MTDR) and Ovintiv Inc. (OVV).
The top 10 holdings account for about 40.93% of total assets under management.
Performance and Risk
So far this year, FXN has lost about -2.04%, and is down about -3.66% in the last one year (as of 12/30/2024). During this past 52-week period, the fund has traded between $15.41 and $19.35.
The ETF has a beta of 1.62 and standard deviation of 28.21% for the trailing three-year period, making it a high risk choice in the space. With about 40 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Energy AlphaDEX ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FXN is a sufficient option for those seeking exposure to the Energy ETFs area of the market. Investors might also want to consider some other ETF options in the space.
Vanguard Energy ETF (VDE) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR ETF (XLE) tracks Energy Select Sector Index. Vanguard Energy ETF has $7.40 billion in assets, Energy Select Sector SPDR ETF has $33.19 billion. VDE has an expense ratio of 0.10% and XLE charges 0.09%.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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First Trust Energy AlphaDEX ETF (FXN): ETF Research Reports
ConocoPhillips (COP) : Free Stock Analysis Report
Energy Select Sector SPDR ETF (XLE): ETF Research Reports
Matador Resources Company (MTDR) : Free Stock Analysis Report
Vanguard Energy ETF (VDE): ETF Research Reports
Ovintiv Inc. (OVV) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
