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Should First Trust Capital Strength ETF (FTCS) Be on Your Investing Radar?

Zacks Equity Research
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The First Trust Capital Strength ETF (FTCS) was launched on 07/06/2006, and is a passively managed exchange traded fund designed to offer broad exposure to the Large Cap Blend segment of the US equity market.

The fund is sponsored by First Trust Advisors. It has amassed assets over $1.84 B, making it one of the larger ETFs attempting to match the Large Cap Blend segment of the US equity market.

Why Large Cap Blend

Companies that find themselves in the large cap category typically have a market capitalization above $10 billion. Overall, they are usually a stable option, with less risk and more sure-fire cash flows than mid and small cap companies.

Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.

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 one of the more expensive products in the space.

It has a 12-month trailing dividend yield of 1.15%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Financials sector--about 23.70% of the portfolio. Industrials and Consumer Staples round out the top three.

Looking at individual holdings, Anthem, Inc. (ANTM) accounts for about 2.22% of total assets, followed by Amphenol Corporation (APH) and Automatic Data Processing, Inc. (ADP).

The top 10 holdings account for about 21.17% of total assets under management.

Performance and Risk

FTCS seeks to match the performance of the The Capital Strength Index before fees and expenses. The Capital Strength Index is an equal-dollar weighted index which provides exposure to well-capitalized companies with strong market positions based on strong balance sheets, high degree of liquidity, ability to generate earnings growth & record financial strength & profit growth.

The ETF has added about 10.00% so far this year and is up about 3.27% in the last one year (as of 03/07/2019). In the past 52-week period, it has traded between $45.20 and $55.82.

The ETF has a beta of 0.91 and standard deviation of 11.96% for the trailing three-year period, making it a medium risk choice in the space. With about 50 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust Capital Strength 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, FTCS is a good option for those seeking exposure to the Style Box - Large Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Core S&P 500 ETF (IVV) and the SPDR S&P 500 ETF (SPY) track a similar index. While iShares Core S&P 500 ETF has $159.27 B in assets, SPDR S&P 500 ETF has $260.46 B. IVV has an expense ratio of 0.04% and SPY charges 0.09%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

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 Capital Strength ETF (FTCS): ETF Research Reports
 
Amphenol Corporation (APH) : Free Stock Analysis Report
 
iShares Core S&P 500 ETF (IVV): ETF Research Reports
 
SPDR S&P 500 ETF (SPY): ETF Research Reports
 
Anthem, Inc. (ANTM) : Free Stock Analysis Report
 
Automatic Data Processing, Inc. (ADP) : Free Stock Analysis Report
 
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