Should First Trust Large Cap Value AlphaDEX ETF (FTA) Be on Your Investing Radar?
Looking for broad exposure to the Large Cap Value segment of the US equity market? You should consider the First Trust Large Cap Value AlphaDEX ETF (FTA), a passively managed exchange traded fund launched on 05/08/2007.
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.19 billion, making it one of the average sized ETFs attempting to match the Large Cap Value segment of the US equity market.
Why Large Cap Value
Companies that find themselves in the large cap category typically have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.
While value stocks have lower than average price-to-earnings and price-to-book ratios, they also have lower than average sales and earnings growth rates. When you look at long-term performance, value stocks have outperformed growth stocks in nearly all markets. But in strong bull markets, growth stocks are more likely to be winners.
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 0.59%, making it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 2.17%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Financials sector--about 24.90% of the portfolio. Industrials and Utilities round out the top three.
Looking at individual holdings, Pultegroup, Inc. (PHM) accounts for about 1.18% of total assets, followed by D.r. Horton, Inc. (DHI) and Lennar Corporation (LEN).
The top 10 holdings account for about 10.38% of total assets under management.
Performance and Risk
FTA seeks to match the performance of the Nasdaq AlphaDEX Large Cap Value Index before fees and expenses. The NASDAQ AlphaDEX Large Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Value Index.
The ETF has added about 3.29% so far this year and it's up approximately 9.20% in the last one year (as of 09/19/2023). In the past 52-week period, it has traded between $57.68 and $73.30.
The ETF has a beta of 1.13 and standard deviation of 18.32% for the trailing three-year period, making it a medium risk choice in the space. With about 188 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Large Cap Value 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, FTA is a sufficient option for those seeking exposure to the Style Box - Large Cap Value area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell 1000 Value ETF (IWD) and the Vanguard Value ETF (VTV) track a similar index. While iShares Russell 1000 Value ETF has $50.54 billion in assets, Vanguard Value ETF has $101.60 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.
Bottom-Line
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.
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 Large Cap Value AlphaDEX ETF (FTA): ETF Research Reports
PulteGroup, Inc. (PHM) : Free Stock Analysis Report
Lennar Corporation (LEN) : Free Stock Analysis Report
D.R. Horton, Inc. (DHI) : Free Stock Analysis Report
Vanguard Value ETF (VTV): ETF Research Reports
iShares Russell 1000 Value ETF (IWD): ETF Research Reports
