Launched on 05/08/2007, the First Trust Industrials/Producer Durables AlphaDEX ETF (FXR) is a smart beta exchange traded fund offering broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.67 billion, making it one of the larger ETFs in the Industrials ETFs. Before fees and expenses, FXR seeks to match the performance of the StrataQuant Industrials Index.
The StrataQuant Industrials 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.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.60% for FXR, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.86%.
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.
For FXR, it has heaviest allocation in the Industrials sector --about 64.70% of the portfolio --while Materials and Financials round out the top three.
Looking at individual holdings, Howmet Aerospace Inc. (HWM) accounts for about 1.58% of total assets, followed by Adt Inc. (ADT) and Genpact Limited (G).
The top 10 holdings account for about 14.19% of total assets under management.
Performance and Risk
The ETF has lost about -10.47% and is down about -2.72% so far this year and in the past one year (as of 04/28/2025), respectively. FXR has traded between $60.85 and $83.27 during this last 52-week period.
FXR has a beta of 1.14 and standard deviation of 21.50% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 137 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Industrials/Producer Durables AlphaDEX ETF is a reasonable option for investors seeking to outperform the Industrials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Industrials ETF (VIS) tracks MSCI US Investable Market Industrials 25/50 Index and the Industrial Select Sector SPDR ETF (XLI) tracks Industrial Select Sector Index. Vanguard Industrials ETF has $5.14 billion in assets, Industrial Select Sector SPDR ETF has $19.14 billion. VIS has an expense ratio of 0.09% and XLI charges 0.08%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Industrials ETFs.
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 Industrials/Producer Durables AlphaDEX ETF (FXR): ETF Research Reports Genpact Limited (G): Free Stock Analysis Report Vanguard Industrials ETF (VIS): ETF Research Reports Industrial Select Sector SPDR ETF (XLI): ETF Research Reports ADT Inc. (ADT): Free Stock Analysis Report Howmet Aerospace Inc. (HWM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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