Short interest for First Trust Germany AlphaDEX Fund gives investors a sense of the degree to which investors are betting on the decline of First Trust Germany AlphaDEX Fund's stock. Short interest data is updated every two weeks.

First Trust Germany AlphaDEX Fund (NASDAQ:FGM), Short Interest Report

First Trust Germany AlphaDEX Fund

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This ETF Will Work...Until It Doesn&#39;t

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<ul>
<li>Germany is investing &euro;10 billion ($12 billion) to support technology startups in their growth phase,&nbsp;<a class="editor-rtfLink" href="https://www.bloomberg.com/news/articles/2021-06-22/germany-sets-up-12-billion-fund-to-finance-technology-startups?srnd=technology-vp&amp;sref=TBDibEcD" style="color:#4a6ee0; background:transparent; margin-top:0pt; margin-bottom:0pt" target="_blank">Bloomberg reports</a>.</li>
<li>The money will find its way into an investment fund to help the startups seamlessly raise venture capital, Finance Minister Olaf Scholz and Economy Minister Peter Altmaier said.</li>
<li>German startups, including financial technology firm N26, air-taxi maker Lilium and travel platform Omio, raised $4.5 billion in 2020, with the largest rounds still led by foreign investors.</li>
<li>While access to private capital has improved in recent years, female founders remain a minority in the German startup ecosystem.</li>
</ul>

The International Monetary Fund&nbsp;recently raised its growth forecast for Germany, the biggest country in the 19-nation Eurozone bloc. We note that it grew at an impressive pace in the fourth quarter of 2017. The economy has been benefiting from low unemployment and interest rates. Moreover, a global recovery in trade has been a positive for this export-dependent country.
Leading economic institutes in the country, on which the government depends to issue its own growth estimates, will revise their growth estimates soon to reflect the more optimistic scenario.
Into the Headlines
The Washington-based organization expects the German economy to grow 2.5% in 2018, 0.2% more than its previous estimate released in January. For 2019, the IMF expects a calendar adjusted growth rate of 2.0%.
Although the economy seemed to have lost some steam in the beginning of 2018, strong economic fundamentals led to optimistic estimates. Strong tax revenues, a record budget surplus and strong employment figures are expected to boost German GDP growth. Per a Destatis report, Germany&#39;s budget surplus increased to 36.6 billion euros in 2017, the highest ever surplus since German reunification in 1990.
Coming to joblessness, seasonally adjusted unemployment rate in March was 5.3%. The number of unemployed people in the month was 2.5 million, 204,000 lower than the number reported in the same period a year ago, per a DW.com <a href="http://www.dw.com/en/germanys-jobless-rate-hits-fresh-record-low-as-economy-booms/a-43180134">article</a>.&nbsp;
Let us now discuss a few ETFs that are primarily focused on providing exposure to German equities.
iShares MSCI Germany ETF&nbsp;(NYSE: <a class="ticker" href="/stock/ewg#NYSE">EWG</a>)
This fund is an appropriate bet for those looking to gain exposure to large-cap companies in Germany.
EWG has AUM of $4.3 billion and charges 49 basis points in fees per year. Consumer Discretionary, Financials and Materials are the top three sectors of this fund, with 19.4%, 15.0% and 14.4% allocation, respectively. The top three holdings are Allianz, SAP and Siemens AG, with 7.2%, 7.1% and 6.9% exposure, respectively. EWG has returned 18.8% in a year.
First Trust Germany AlphaDEX Fund&nbsp;(NASDAQ: <a class="ticker" href="/stock/fgm#NASDAQ">FGM</a>)
This fund seeks to provide exposure to German equities across market caps.
FGM has AUM of $272.4 million and charges 80 basis points in fees per year. Consumer Discretionary, Industrials and Real Estate are the top three sectors of this fund, with 24.2%, 19.9% and 17.0% allocation, respectively. From an individual holdings perspective, Wirecard AG, Deutsche Wohnen AG and Grand City Properties S.A. are the top three holdings of the fund, with 5.0%, 4.4% and 4.2% allocation, respectively. It has returned 33.5% in a year.
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First Trust Dorsey Wright International Focus 5 ETF (NASDAQ: <a class="ticker" href="/stock/ifv#NASDAQ">IFV</a>) has received arguably the least amount of fanfare among the most successful ETFS. Just 10 months after coming to market, the First Trust Dorsey Wright International Focus 5 ETF is now home to $641.1 million in assets under management.

	Judging by flows data, IFV got off to a slow start as essentially all of the ETF&#39;s current assets under management tally has flowed into the fund this year. Of course, it is worth noting IFV enjoys a big marketing advantage. It is the international equivalent of the wildly popular First Trust Dorsey Wright Focus 5 ETF (NASDAQ: <a class="ticker" href="/stock/fv#NASDAQ">FV</a>). FV does not turn two until March and it already has over $4.2 billion in assets.

	IFV applies the methodology used by FV at the international level. Meaning IFV holds five First Trust single-country or regional funds displaying favorable momentum characteristics. IFV&#39;s current lineup includes the First Trust United Kingdom AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fku#NYSE">FKU</a>), First Trust Switzerland AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fsz#NYSE">FSZ</a>) and the First Trust Germany AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fgm#NYSE">FGM</a>).

	The drawback with momentum strategies, including those applied within ETFs, is that while they shine during bull markets, they are often swiftly rejected during market declines.

	&ldquo;Momentum can work really well for a period of time, typically during a bull market. But when the market suddenly turns, momentum strategies tend to be overweight in areas that fall the fastest. So, net-net, over a full market cycle, any outperformance during the bull market can get wiped out during a market decline. For example, in 2011, when the MSCI EAFE Index was down about 12%, a similar Dorsey Wright international-equity ETF declined 18%,&rdquo; <a href="http://www.morningstar.com/cover/videocenter.aspx?id=716962">according to Morningstar</a>.

	To be fair, IFV is up nearly 3 percent over the past year while the MSCI EAFE Index is higher by just 0.4 percent. However, FV can teach investors some lessons about what to expect with IFV when the latter&#39;s holdings fall out of favor.

	For example, FV languished almost immediately out of the gate because soon after that ETF debuted, 2014&#39;s brief bear market for biotechnology and Internet stocks struck. And although FV&#39;s year-to-date performance looks good, the ETF is off almost 11 percent over the past 90 days, a period that includes <a href="http://www.benzinga.com/general/biotech/15/08/5781564/a-bad-sign-for-biotech-bulls">significant retrenchment </a>in biotech stocks.

	Relative strength analysis of IFV&#39;s holdings is conducted weekly, so it is possible that if country- or region-specific issues come to pass, IFV can quickly ditch a problem ETF and then rebalance to equal weight at quarter end.

	&ldquo;This strategy is based on the observation that areas of the market that are currently outperforming tend to continue to outperform. So far, the fund&#39;s strategy is working. Over the last year, it outperformed its market-cap-weighted benchmark by about 500 basis points,&rdquo; notes Morningstar.

	However, the research firm also notes the problem with an ETF like IFV is that ordinary investors are likely to buy high and sell low.

This ETF Will Work...Until It Doesn't

Germany, the Eurozone's largest economy, has long been a beacon of light in an economically troubled region and investors' confidence in German equities has been rewarded this year. The country's benchmark DAX is one of the best-performing major indexes in the world while the iShares MSCI Germany Index Fund (NYSE: <a class="ticker" href="/stock/ewg#NYSE">EWG</a>) has surged 28.2 percent.

However, there are signs the German economy is slowing. As such, BlackRock Global Chief Investment Strategist Russ Koesterich has pared his view on Germany to Neutral from Overweight. Koesterich points to a recent slide in German retail sales as one indicator the economy there is slowing.

"The most recent reading for German retail sales was a drop of 3.6%. With retail sales collapsing, German consumer discretionary companies, which comprise the biggest weight in the index, may disappoint in the coming quarters," said <a href="http://isharesblog.com/blog/2012/12/18/with-german-growth-slowing-time-to-take-some-profits/">Koesterich in a blog post</a>.

Indeed, a potential decline in consumer discretionary shares could be problematic for Germany ETFs. The aforementioned iShares MSCI Germany Index Fund, the largest Germany ETF by assets, allocates almost 18.5 percent of its weight to discretionary names.

EWG is not alone in terms of large weights to German discretionary stocks. The First Trust Germany AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fgm#NYSE">FGM</a>) holds a 26.6 percent weight to that group. FGM debuted in February and has since returned 9.3 percent. The Market Vectors Germany Small-Cap ETF (NYSE: <a class="ticker" href="/stock/gerj#NYSE">GERJ</a>) has a 16.6 percent weight to the discretionary sector. GERJ has surged 30.4 percent year-to-date.

Another issue to consider, Koesterich notes, is valuation. As in German equities were once cheap, but that is no longer the case. 

"The price-to-book ratio now stands at 1.53. While this is still cheap compared to the United States, it is up considerably from a year ago, when it was 1.27, and is increasingly expensive compared to other European markets," said Koesterich.

EWG currently has a price-to-book ratio of almost 2.2, <a href="http://us.ishares.com/product_info/fund/overview/EWG.htm?fundSearch=true&amp;qt=EWG">according to iShares data</a>. That is well above the 1.51 price-to-book sported by the iShares MSCI Austria Investable Market Index Fund (NYSE: <a class="ticker" href="/stock/ewo#NYSE">EWO</a>) and the 1.76 price-to-book on the iShares MSCI France Index Fund (NYSE: <a class="ticker" href="/stock/ewq#NYSE">EWQ</a>), just to name a pair.

FGM appears to be more reasonably valued than EWG with a price-to-book ratio of just 1.25, <a href="http://www.ftportfolios.com/retail/etf/etfsummary.aspx?Ticker=FGM">according to First Trust data</a>. In what may be a surprise to some investors, GERJ's exposure to German small-caps has not led to a rich valuation despite the ETF's stellar run higher this year. That ETF has a price-to-earnings ratio of 11.24 and a price-to-book ratio of 1.43.

Overall, Koesterich said he still likes Germany's long-term fundamentals, but he advises waiting for a pullback to buy this market.

":onger term I still like the fundamentals of Germany, which is distinguished by its world class industrial and export sectors. And I would look to re-enter the market on a pullback, or on signs of stabilization in the German economy. However, in the near-term I would favor taking some profit and adopting a neutral stance on German equities," he said in the note.

For more on ETFs, click <a href="http://www.benzinga.com/etfs">here</a>.

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Amid Signs of Slowing Growth, Koesterich Downgrades Germany

Europe's worsening sovereign debt crisis is doing more than sending Italian and Spanish yields soaring. Returns have lagged for ETFs that track three of the four nations participating in the semifinal round of the 2012 UEFA EURO Finals.

Many may question the correlation to football wins and equity market performance. However, legitimate studies have <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=677103"> demonstrated the link</a>.

"For example, a loss in the World Cup elimination stage leads to a next-day abnormal stock return of -49 basis points. This loss effect is stronger in small stocks and in more important games," according to the study "Sports Sentiment and Stock Returns."

Three of the four UEFA EURO semifinalists are undoubtedly soccer blue bloods. Portugal, which has no ETF tracking it, has picked up the quality of its international play in recent years. Spain has won the last two major international competitions in has participated in – the 2010 World Cup and UEFA EURO 2008.

Those two nations square off in one semifinal. The other match is between Germany and Italy. Combined, those two countries own seven of the 19 World Cup titles (Italy with four, Germany with three.)

The worst result that the four sides have notched in UEFA EURO this year has been a draw. Germany, the Eurozone's largest economy, has won all four of its matches. However, the sovereign debt calamity has thwarted any potential for the relevant ETFs to move higher.

iShares MSCI Germany Index Fund (NYSE: <a class="ticker" href="/stock/ewg#NYSE">EWG</a>)
As was previously noted, the Germans have looked nothing short of impressive in advancing deep into yet another international football tournament. Still, that has not benefited the iShares MSCI Germany Index Fund. The largest Germany-specific ETF is down about 3.1 percent since the tournament started. Other Germany ETFs have fallen as well. The First Trust Germany AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fgm#NYSE">FGM</a>) is off nearly 1.7 percent since the start of the tournament while the Market Vectors Germany Small-Cap ETF (NYSE: <a class="ticker" href="/stock/gerj#NYSE">GERJ</a>) has given up just over 4 percent.

iShares MSCI Spain Index Fund (NYSE: <a class="ticker" href="/stock/ewp#NYSE">EWP</a>)
Spain's lone ETF has had a nightmarish <a href="http://www.benzinga.com/markets/bonds/12/06/2694990/5-etfs-for-the-eu-summit-epv-ewp-itly">recent track record.</a> The fund could use any help it can get to move higher, football-related or otherwise. Spain's footballers have not looked overly impressive in UEFA EURO, but the team has not lost and is on the brink of playing for another major title. The market could care less. EWP has lost about 1.4 percent since the tournament started.

iShares MSCI Italy Index Fund (NYSE: <a class="ticker" href="/stock/ewi#NYSE">EWI</a>)
Despite Italy's rich football history, expectations were low for the Azzurri heading into this tournament. Some so-called experts said the team would not advance beyond the group stage. The problem for EWI is that expectations are low for Italy's economy. Already in a recession, Italy is widely viewed as the next Eurozone shoe to drop after Spain. Even if that does not happen, EWI has lost roughly 5.3 percent since June 8.

Market Vectors Poland ETF (NYSE: <a class="ticker" href="/stock/plnd#NYSE">PLND</a>)
Poland has co-hosted 2012 UEFA EURO along with Ukraine, and while the team's early exit from the tournament has left Polish football fans disappointed, investors can take heart in a few facts. 

First, Poland still is not a member of the Eurozone. Second, Poland <a href="http://www.benzinga.com/markets/bonds/12/06/2698656/5-etfs-with-stealthy-bullish-performances">still has a better growth outlook than any of the PIIGS</a>.

Finally, despite the fact that Poland is not among the tournament's final four, Poland ETFs have reigned supreme. Since June 8, PLND and the iShares MSCI Poland Investable Market Index Fund (NYSE: <a class="ticker" href="/stock/epol#NYSE">EPOL</a>) have each returned about 6 percent.

For more on UEFA EURO and ETFs, click <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/05/2551878/etfs-for-the-european-championship-ewi-gerj-epol">here</a>.

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Europe's Woes Trumping Football Glory (EWG, EWI, EWP)

When it comes to ETFs devoted to Germany, the Euro Zone's largest economy, there's just four on the market today, a number that some might consider to be small given the importance of this country on the global economic stage. Or it can be said that four is enough, but that the assets certainly aren't spread out too well.

The iShares MSCI Germany Index Fund (NYSE: <a class="ticker" href="/stock/ewg#NYSE">EWG</a>), which debuted in March 1996, is the oldest and largest Germany ETF. EWG tracks 52 stocks and has over $2.5 billion in assets under management, a number that is significant enough to potentially keep rivals at bay and ensure <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/03/2445438/etf-showdown-deutschland-battle-ewg-gerj-ewgs">other Germany ETFs may slip through the cracks</a>.

One Germany-specific ETF that has gone unnoticed, and we're not saying that's a good thing, is the First Trust Germany AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fgm#NYSE">FGM</a>). The First Trust Germany AlphaDEX Fund debuted on Valentine's Day and has managed to attract little in the way of investor love. Maybe it's because the Euro Zone is a mess right and investors are even running away from Germany. Or maybe it's because FGM charges 0.8% compared to just 0.51% for EWG. Whatever the reason, the First Trust offering has stumbled out of the gate, at least in terms of superficial metrics such as AUM and average daily volume (less than 100 shares).

Speaking to the points of volume and FGM's anonymous status, it must be noted that near as we can tell, the new Germany fund hasn't traded since April 24. That's surprising if for no other reason than that the Euro Zone's calamity has escalated. Figure it this way: Since April 24, France has elected a new socialist president and Greece has tried and failed to form a new coalition government. It would be logical to assume these headlines would spark some interest in FGM, but that has not been the case.

It is the lack of interest in FGM to this point that belies the two most important factors about the fund: Its returns and how it generates those returns. While FGM and EWG are both passively managed, the AlphaDEX methodology employed by First Trust <a href="http://www.benzinga.com/etfs/emerging-market-etfs/11/04/1037876/whats-the-difference-first-trust-china-etf-vs-fxi">can lead to important and profitable differences over rival funds</a>.

FGM's index employs the AlphaDEX stock selection methodology which uses fundamental growth and value factors to objectively select stocks from the S&amp;P Germany BMI universe which may generate positive alpha relative to traditional passive indices. The index is a modified equal-dollar weighted index where higher ranked stocks receive a higher weight within the index, First Trust says in FGM's fact sheet.

Said another way, most traditional ETFs are weighted by the market value of their constituents, but FGM employs a quality scree so the highest quality, not always the largest, stocks receive larger allocations within the fund. 

Obviously, there's going to be some overlap in terms of holdings between the FGB and EWG. Both funds offer heavy exposure to German large caps and that means Deutsche Bank (NYSE: <a class="ticker" href="/stock/db#NYSE">DB</a>), SAP (NYSE: <a class="ticker" href="/stock/sap#NYSE">SAP</a>), BMW and Volkswagen, among others, appear in both funds.

The bottom line is this: Including the Market Vectors Germany Small-Cap ETF (NYSE: <a class="ticker" href="/stock/gerj#NYSE">GERJ</a>) and the iShares MSCI Germany Small Cap Index Fund (BATS: EWGS), there are four Germany ETFs trading in the U.S. today. FGM wins the silver medal, barely trailing EWGS. Of course, the more natural comparison is against EWG. That fund is down almost 9.4% compared to a less than 3.4% decline for the First Trust fund. Obviously, index methodology is playing a part in that performance and that is something investors cannot afford to overlook.

For more on Germany ETFs, please click <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/03/2445438/etf-showdown-deutschland-battle-ewg-gerj-ewgs">HERE</a>.

Checking In: The Other Way to Germany (EWG, FGM, EWGS)

U.S. retail sales rose 1.1% in February and, no pun intended, it was auto sales that drove the overall number higher. Last month, auto sales climbed 1.6% from January and surged almost 7% from February 2011. What's important about auto sales figures is that the numbers only measure cars sold to consumers, not to corporations or car rental outfits.

A rebounding U.S. economy has proven to be excellent news for the likes of Ford (NYSE: <a class="ticker" href="/stock/f#NYSE">F</a>) and General Motors (NYSE: <a class="ticker" href="/stock/gm#NYSE">GM</a>), but there are other ways to profit from <a href="http://www.benzinga.com/analyst-ratings/analyst-color/12/03/2409099/time-to-consider-auto-etfs-as-sales-rise-f-gm-vrom">resurgent auto sales</a>.

Here are the ETFs that could race higher as global auto sales continue their upward momentum.

Global X Auto ETF (NYSE: <a class="ticker" href="/stock/vrom#NYSE">VROM</a>)
The virtues of the Global X Auto ETF <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/03/2412252/these-etfs-could-forecast-2012-election-results-iez-uga-vrom">have been extolled</a> one just needs to know where to look. While thinly traded, VROM is one of the better discretionary plays out there, having jumped more than 24% year-to-date almost double the returns offered by the Consumer Discretionary Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xly#NYSE">XLY</a>).

Maybe the best reason to like VROM is that the ETF is not heavily allocated to just Ford and GM. Rather, VROM offers exposure to the German and Japanese auto giants and parts suppliers as well.

First Trust Germany AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fgm#NYSE">FGM</a>)
When it comes to Germany-specific ETFs, the iShares MSCI Germany Index Fund (NYSE: <a class="ticker" href="/stock/ewg#NYSE">EWG</a>) is the oldest and largest. When it comes to getting exposure to German automakers via an ETF, the newly minted First Trust Germany AlphaDEX Fund is the superior alternative. 

The auto industry is major part of the German economy and this is the world's second-largest exporter we're talking about, so if the global economy gains steam, FGM's weight to Volkswagen, Daimler, BMW, etc. could actually make the fund the top performer among Germany ETFs.

Consumer Discretionary Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xly#NYSE">XLY</a>)
XLY is known for its allocations to stocks such as McDonald's (NYSE: <a class="ticker" href="/stock/mcd#NYSE">MCD</a>), Walt Disney (NYSE: <a class="ticker" href="/stock/dis#NYSE">DIS</a>) and Nike (NYSE: <a class="ticker" href="/stock/nke#NYSE">NKE</a>), among others, but Ford is one of the ETF's top-10 holdings. Beyond that, XLY is home to 80 stocks and when including Ford, 11 of those stocks are auto industry plays. Looking at XLY's chart, it would appear advisable to wait for a pullback, but with economic data supporting more gains in discretionary stocks, that pullback may not materialize.

iShares Russell Midcap Value Index Fund (NYSE: <a class="ticker" href="/stock/iws#NYSE">IWS</a>)
When an ETF is home to 530 stocks as the iShares Russell Midcap Value Index Fund is, no single stock or niche group is going to account for an excessive portion of the fund's weight. That's true with IWS, but the ETF does feature smaller allocations to an array of auto parts suppliers. IWS has been on a tear since late December 2011 and the chart indicates the ETF needs to crack $48.50 to confirm a breakout.

Financials account for almost a third of IWS' weight so the ETF could be in play <a href="http://www.benzinga.com/media/cnbc/12/03/2419748/beyond-xlf-4-stress-test-etfs-kbe-jpm-bac">for other reasons</a> as soon as this week.