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

Zacks Equity Research
Investors need to pay close attention to Canopy Growth (CGC) stock based on the movements in the options market lately.

The First Trust Consumer Discretionary AlphaDEX Fund (FXD) was launched on 05/08/2007, and is a passively managed exchange traded fund designed to offer broad exposure to the Consumer Discretionary - Broad segment of the equity market.

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 9, placing it in bottom 44%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $305.08 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

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

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 0.97%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Consumer Discretionary sector--about 75.20% of the portfolio. Telecom and Industrials round out the top three.

Looking at individual holdings, Caesars Entertainment Corporation (CZR) accounts for about 1.86% of total assets, followed by Dish Network Corporation (DISH) and Lear Corporation (LEA).

The top 10 holdings account for about 16.58% of total assets under management.

Performance and Risk

So far this year, FXD has added about 11.13%, and is up roughly 0.29% in the last one year (as of 02/11/2019). During this past 52-week period, the fund has traded between $34.86 and $43.99.

The ETF has a beta of 1.03 and standard deviation of 14.59% for the trailing three-year period, making it a medium risk choice in the space. With about 111 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 excellent 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 $2.52 B in assets, Consumer Discretionary Select Sector SPDR Fund has $12.38 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.


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First Trust Consumer Discretionary AlphaDEX Fund (FXD): ETF Research Reports
 
Lear Corporation (LEA) : Free Stock Analysis Report
 
DISH Network Corporation (DISH) : Free Stock Analysis Report
 
Consumer Discretionary Select Sector SPDR Fund (XLY): ETF Research Reports
 
Vanguard Consumer Discretionary ETF (VCR): ETF Research Reports
 
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