U.S. Markets open in 21 mins

Should You Invest in the First Trust Consumer Discretionary AlphaDEX Fund (FXD)?

Zacks Equity Research
Companies In The News Are: CSCO,DDS,JPM,BRK.B,AMAT

If you're interested in broad exposure to the Consumer Discretionary - Broad segment of the equity market, look no further than the First Trust Consumer Discretionary AlphaDEX Fund (FXD), a passively managed exchange traded fund launched on 05/08/2007.

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.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Consumer Discretionary - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 12, placing it in bottom 25%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $373.18 M, making it one of the larger ETFs attempting to match the performance of the Consumer Discretionary - Broad segment of the equity market. FXD seeks to match the performance of the StrataQuant Consumer Discretionary Index before fees and expenses.

The StrataQuant Consumer Discretionary Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.63%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.94%.

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 in the Consumer Discretionary sector--about 75.60% of the portfolio. Telecom and Industrials round out the top three.

Looking at individual holdings, Comcast Corporation (class A) (CMCSA) accounts for about 1.78% of total assets, followed by Graham Holdings Company (GHC) and Qurate Retail Inc (QRTEA).

The top 10 holdings account for about 16.99% of total assets under management.

Performance and Risk

So far this year, FXD has added about 0.24%, and is up about 10.91% in the last one year (as of 11/08/2018). During this past 52-week period, the fund has traded between $38.43 and $45.22.

The ETF has a beta of 1 and standard deviation of 14.39% for the trailing three-year period, making it a medium risk choice in the space. With about 110 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Consumer Discretionary AlphaDEX Fund holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FXD is an outstanding option for investors seeking exposure to the Consumer Discretionary ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Vanguard Consumer Discretionary ETF (VCR) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR Fund (XLY) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $2.94 B in assets, Consumer Discretionary Select Sector SPDR Fund has $13.90 B. VCR has an expense ratio of 0.10% and XLY charges 0.13%.

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.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
FT-CONSUMR DIS (FXD): ETF Research Reports
 
Comcast Corporation (CMCSA) : Free Stock Analysis Report
 
SPDR-CONS DISCR (XLY): ETF Research Reports
 
VIPERS-CONS DIS (VCR): ETF Research Reports
 
Qurate Retail Group, Inc. (QRTEA) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research