First Trust Emerging Markets Small Cap AlphaDEX Fund (NASDAQ: FEMS)

Latest News for First Trust Emerging Markets Small Cap AlphaDEX Fund (NASDAQ:FEMS)

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ETF Stats for February 2012: 2nd Highest Launch Count On Record

Sick of hearing about U.S. small caps and the relevant exchange-traded funds lagging their large-cap counterparts? It is understandable if investors feel that way, but it is concerning that the Russell 2000 Index fell 1.2 percent last week while the S&amp;P 500 nudged modestly higher.
As has been widely documented through 2017, international small-cap ETFs have been much better bets than their U.S. equivalents. That includes emerging markets small-cap ETFs. An asset class that is believed to be exceptionally volatile is delivering in significant fashion for investors. Just look at the First Trust Emerging Markets Small Cap AlphaDEX Fund (NASDAQ: <a class="ticker" href="/stock/fems#NASDAQ">FEMS</a>).
FEMS is up 32.1 percent year to date, meaning the 2017 gains offered by the Russell 2000 Index and the S&amp;P SmallCap 600 Index could be combined then multiplied by five and still not exceed the returns offered by FEMS this year.
<h3>What&#39;s In The FEMS Mix</h3>
FEMS follows the NASDAQ AlphaDEX Emerging Markets Small Cap Index, which is a smart beta approach to smaller emerging markets equities. The ETF turned 5 years old earlier this year.
&ldquo;To construct the Index, Nasdaq ranks the eligible stocks on growth factors including 3-, 6- and 12- month price appreciation, sales to price and one year sales growth, and separately on value factors including book value to price, cash flow to price and return on assets,&rdquo; according to <a href="http://www.ftportfolios.com/Retail/Etf/EtfSummary.aspx?Ticker=FEMS">First Trust</a>. &ldquo;All stocks are ranked on the sum of ranks for the growth factors and, separately, all stocks are ranked on the sum of ranks for the value factors. A stock must have data for all growth and/or value factors to receive a rank for that style.&rdquo;
Data suggest the FEMS methodology works. Since coming to market in February 2012, FEMS has returned 6.3 percent. While that is not spectacular, it does outpace the 2.8 percent returned by the MSCI Emerging Market Small-Cap Index over the same period.
<h3>Countries And Sectors</h3>
FEMS holds 205 stocks. At the geographic level, the ETF allocates nearly 30 percent of its weight to Taiwan, historically one of the least volatile emerging markets. China and Brazil combine for a quarter of the ETF&#39;s weight. Overall, small caps from 10 countries are found in FEMS.
FEMS is benefiting from the stellar performance of emerging markets technology names this year as that sector is over 20 percent of the ETF&#39;s weight. As a small-cap ETF, FEMS is likely to avoid state-controlled companies as highlighted by a mere 10-percent combined weight to the energy and financial services sectors.
Materials and real estate names combine nearly 31 percent of the ETF&#39;s roster while FEMS&#39;s consumer exposure is merely adequate at 14.6 percent.
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Somewhat hidden among the blistering pace of new ETF introductions this year is the proliferation of <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/01/2258235/trio-of-emerging-markets-small-cap-etfs-debut-today">international small-cap funds</a>. The race to roll out more global small-cap ETFs has even prompted some ETF sponsors to try their luck with <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/03/2390987/checking-in-success-where-others-failed-ewhs-ewh-fxi">concepts that previously failed</a>.

It's easy to understand why ETF issuers want to get these funds out to investors: Many have proven popular. Plenty of country-specific small-cap funds have been embraced by investors and the multi-country SPDR S&amp;P Emerging Markets Small Cap ETF (NYSE: <a class="ticker" href="/stock/ewx#NYSE">EWX</a>) has over $913 million in assets under management, indicating there might be room for a new challenger such as the First Trust Emerging Markets Small Cap AlphaDEX Index Fund (NYSE: <a class="ticker" href="/stock/fems#NYSE">FEMS</a>).

FEMS, which tracks the Defined Emerging Markets Small Cap Index, isn't even a month old yet and the ETF enters an arena with plenty of competition. In addition to EWX, there's the WisdomTree Emerging Markets SmallCap Dividend ETF (NYSE: <a class="ticker" href="/stock/dgs#NYSE">DGS</a>) and the iShares MSCI Emerging Markets Small Cap Index Fund (NYSE: EEMS).

Even with the potential for multiple rivalries, FEMS is off a decent start with over $3 million in AUM. Diversity nuts will love this fund as FEMS is home to almost 200 stocks and five sectors – materials, industrials, technology, consumer discretionary and financials – receive double-digit allocations. Those sector weights range from 15.49% for financials to 18.17% for materials and no single stock receives a weight above 1.21%.

At the sector level FEMS certainly offers better diversity than its iShares counterpart and is at the very least comparable to its SPDR equivalent. 

Regarding country exposure, without knowing what "other" is defined as, FEMS offers exposure to 10 countries. At the bottom, Russia receives an allocation of less than 2%. The word of caution on this note is that China and Taiwan combine for over 43% of FEMS' country weight.

It's surprising that Brazil and Russia combine for less than 6% of this ETF's weight considering they are huge economies and there are small-cap ETFs exclusively devoted to the duo, the Market Vectors Brazil Small-Cap ETF (NYSE: <a class="ticker" href="/stock/brf#NYSE">BRF</a>) and the Market Vectors Russia Small-Cap ETF (NYSE: <a class="ticker" href="/stock/rsxj#NYSE">RSXJ</a>). India is also no where to be found in this ETF.

We like the fact that FEMS' third-largest country weight is Thailand, but going forward, the ETF might be better served reducing its Taiwan exposure and redistributing it among Brazil, Indonesia, Russia and Thailand. Just our suggestion and if Taiwan loses its emerging markets status this year, FEMS will probably remove the country from its lineup anyway. That could make the new ETF even more intriguing.

With solid economic data bolstering the case for another rate hike, enhanced bond volatility, and fears about war in the Middle East, the stock market will likely witness more volatility in the upcoming months. Amid this, top emerging market ETFs WisdomTree Emerging Markets High Dividend Fund (DEM), SPDR S&P Emerging Markets Small Cap ETF (EWX), and First Trust Emerging Markets Small Cap AlphaDEX Fund (FEMS) could be ideal watchlist additions. Read on… Stronger-than-expected inflation data and blowout job growth in September reignited interest rate worries. Amid the increasing possibility of another rate hike by the Fed, rising Treasury yields, and growing geopolitical tensions due to conflict between Israel and Hamas, the stock market could remain highly volatile in the near term.
Therefore, best-performing emerging markets ETFs WisdomTree Emerging Markets High Dividend Fund (<a href="https://stocknews.com/stock/DEM/">DEM</a>), SPDR S&amp;P Emerging Markets Small Cap ETF (<a href="https://stocknews.com/stock/EWX/">EWX</a>), and First Trust Emerging Markets Small Cap AlphaDEX Fund (<a href="https://stocknews.com/stock/FEMS/">FEMS</a>) could be ideal buys for instant diversification and potential gains.
The Consumer Price Index <a href="https://www.cnbc.com/2023/10/12/cpi-september-2023.html">grew 0.4% in September</a> and 3.7% year-over-year, according to a Bureau of Labor Statistics report. Dow Jones estimates were 0.3% and 3.6%, respectively. The core inflation, excluding food and energy prices, increased 0.3% for the month and 4.1% from a year earlier, in line with economists' expectations.
The data follows a stronger-than-anticipated <a href="https://www.cnbc.com/2023/10/11/ppi-september2023-.html">producer price index reading</a> for September. Persistent inflation reignited interest rate fears.
Further, robust job growth in September poked a hole in the Federal Reserve's cooldown narrative. The U.S. economy added about <a href="https://www.reuters.com/markets/rates-bonds/us-jobs-data-could-be-feds-cue-hike-or-hold-2023-10-06/">336,000 jobs last month</a>, almost twice what economists expected. Also, data for August was revised higher to show 227,000 jobs were added instead of the previously reported 187,000.
The recent <a href="https://www.livemint.com/market/stock-market-news/mysterious-rise-in-us-treasury-yields-perturbs-markets-11697162525624.html">surge in U.S. treasury yields</a> has also sparked more anxiety among investors. On Friday, the yield on the 10-year U.S. Treasury note jumped to 4.88% for the first time since 2007, while the 30-year offering reached 5.05%, which is also a 16-year peak.
Some investors on Wall Street are bracing for enhanced volatility into year-end as yields and oil prices surge, inflation remains sticky, the job market shows resilience, and conflict ensues in the Middle East. However, a focus on earnings and what the Fed will do with interest rates can provide investors optimism in the short term, according to Barclays analyst Ajay Rajadhyaksha.
"Bond volatility and Middle East tensions <a href="https://www.cnbc.com/2023/10/15/stock-futures-today-live-updates.html">are a drag on risky assets</a>, but should be offset by earnings and dovish Fedspeak," Rajadhyaksha said in a note to clients.
Amid an uncertain macroeconomic backdrop, investors could consider adding the best-performing emerging market ETFs to their portfolios for greater diversification and solid returns. Most of these ETFs divide their assets among 20 or more nations, with a majority focus on the emerging markets of Asia and Latin America.
Emerging markets are often considered to have solid growth prospects due to investments in infrastructure, high exports, and the growing domestic consumption of the middle class.
In light of these favorable trends, let's look at the fundamentals of the three top <a href="https://stocknews.com/category/emerging-markets-equities-etfs/">Emerging Markets Equities ETFs</a>, beginning with number 3.
ETF #3: First Trust Emerging Markets Small Cap AlphaDEX Fund (<a href="https://stocknews.com/stock/FEMS/">FEMS</a>)
FEMS aims to outperform other index funds by selecting emerging market securities using quantitative metrics. The fund scores each potential holding by value (book value-to-price, cash flow-to-price, and return on assets) and growth (3-,6- and 12-month price appreciation, sales-to-price, and 1-year sales growth) characteristics and then ranks stocks by whichever trait scores highest.
FEMS tracks the NASDAQ AlphaDEX EM Small Cap Index. The fund has assets under management (AUM) of $334.10 million. It currently has a total of 103 holdings. Its top holdings include Sok Marketler Ticaret AS (SOKM.E) with a 0.94% weighting, Zorlu Enerji Elektrik Uretim A.S. (ZOREN.E) at 0.89%, followed by Aliansce Sonae Shopping Centers S.A. (ALSO3) with a 0.87% weighting.
The fund has an <a href="https://www.investopedia.com/terms/e/expenseratio.asp">expense ratio</a> of 0.80% compared to the category average of 0.51%. Over the past six months, FEMS' fund inflows came in at $31.91 million and $209.63 million over the past year. Also, the ETF has a beta of 0.92.
FEMS pays an annual dividend of $1.51, translating to a 4.04% yield at the prevailing price level. Its dividend payouts have grown at a 4% CAGR over the past five years. The fund's four-year average yield is 4.98%.
FEMS has gained 14.4% over the past year to close the last trading session at $37.32. It has a NAV of <a href="https://www.ftportfolios.com/retail/etf/etfsummary.aspx?Ticker=FEMS">$37.32 as of October 13, 2023</a>.
FEMS' <a href="https://stocknews.com/powr-ratings/">POWR Ratings</a> reflect this promising outlook. The fund's overall A rating equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The fund has an A grade for Trade, Peer, and Buy &amp; Hold. Of the 101 ETFs in the <a href="https://stocknews.com/category/emerging-markets-equities-etfs/">Emerging Markets Equities ETFs</a> group, it is ranked #3.
To access all FEMS' POWR Ratings, <a href="https://stocknews.com/stock/FEMS/">click here</a>.
ETF #2: SPDR S&amp;P Emerging Markets Small Cap ETF (<a href="https://stocknews.com/stock/EWX/">EWX</a>)
EWX seeks to provide exposure to small-cap stocks in emerging markets. The selection universe includes emerging country equities with a market cap between $100 million and $2 billion at the time of inclusion. The fund is relatively efficient from a cost perspective and well-balanced in terms of individual securities sectors and countries.
EWX tracks S&amp;P Emerging Markets Under USD2 Billion Index. With $787.30 million in AUM, its top holdings are U.S. Dollar with a 5.26% weighting in the fund, followed by Gigabyte Technology Co., Ltd. at 0.49%, and Alchip Technologies and State Street Institutional Liquid Reserves Fund at 0.43% and 0.34%, respectively. The fund has a total of 3,500 holdings.
The ETF has an expense ratio of 0.65% compared to the category average of 0.51%. EWX's fund inflows were $89.09 million over the past six months and $130.03 million over the past year.
EWX pays an annual dividend of $1.31, which translates to a 2.48% yield at the current price level. The fund's dividend payouts have grown at a 3.5% CAGR over the past three years. Also, its four-year average yield is 2.80%.
The fund has gained 7.4% year-to-date and 16.8% over the past year to close the last trading session at $53.01. It has a beta of 0.79. EWX's NAV was <a href="https://www.ssga.com/us/en/intermediary/etfs/funds/spdr-sp-emerging-markets-small-cap-etf-ewx">$53.29 as of October 13, 2023</a>.
EWX's solid fundamentals are reflected in its POWR Ratings. The fund has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The fund has an A grade for Trade, Buy &amp; Hold, and Peer. Within the 101 ETFs in the Emerging Markets Equities ETFs group, it is ranked #2.
<a href="https://stocknews.com/stock/EWX/">Click here</a> to see all the EWX ratings.
ETF #1: WisdomTree Emerging Markets High Dividend Fund (<a href="https://stocknews.com/stock/DEM/">DEM</a>)
DEM provides exposure to some of the highest dividend-yielding stocks within the emerging markets with a fundamental weighting system. The fund selects the top 30% of firms ranked by dividend yield from the WisdomTree Emerging Markets Dividend Index.
With $2.50 billion in AUM, DEM's top holdings include Vale S.A. (VALE3), with a 5.01% weighting, followed by Petroleo Brasileiro SA (PETR3) at 4.65%, and MediaTek Inc. and China Construction Bank Corporation Class H with 4.22% and 2,94% weightings, respectively.
The fund currently has 427 holdings in total, with its top 15 assets comprising 35.92% of its AUM. DEM has an expense ratio of 0.63%, relative to the category average of 0.51%. Over the past three months, its fund inflows came in at $156.77 million and $371.09 million over the past six months.
DEM pays an annual dividend of $2.35, translating to a yield of 6.28% at the prevailing price level. Its four-year average dividend yield is 6.08%. Over the past three years, the fund's dividend payments have grown at a CAGR of 8.5%.
The fund has gained 5.2% year-to-date and 13.2% over the past year to close the last trading session at $37.45. It has a beta of 0.75. DEM's NAV was <a href="https://www.wisdomtree.com/investments/etfs/equity/dem">$37.73 as of October 13, 2023</a>.
DEM's POWR Ratings reflect this promising outlook. The fund's overall A rating equates to a Strong Buy in our proprietary rating system.
DEM has an A grade for Peer and Buy &amp; Hold and a B for Trade. It tops the list of 101 ETFs in the same group.
To access DEM's rating for Peer, <a href="https://stocknews.com/stock/DEM/">click here</a>.
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<hr />
DEM shares were unchanged in premarket trading Monday. Year-to-date, DEM has gained 10.45%, versus a 14.67% rise in the benchmark S&amp;P 500 index during the same period.
<hr><div style="clear:both;"></div> <h2>About the Author: Mangeet Kaur Bouns</h2> <img src='https:/wp-content/uploads/2022/01/Mangeet-Kaur-Bouns_Image-4.jpg' style="float:left; padding:5px;width:125px;">Mangeet's keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet's looks to help retail investors understand the underlying factors before making investment decisions.<a href="https://stocknews.com/authors/?author=mangeet-kaurbouns">More...</a>The post <a href=https://stocknews.com/news/dem-ewx-fems-3-emerging-market-etfs-to-watch-for-international-growth/>3 Emerging Market ETFs to Watch for International Growth</a> appeared first on <a href=https://stocknews.com/>StockNews.com</a>

3 Emerging Market ETFs to Watch for International Growth

First Trust Emerging Markets Small Cap AlphaDEX® Fund ETF declares $0.3704 dividend

First Trust Emerging Markets Small Cap AlphaDEX® Fund ETF declares $0.1684 dividend

First Trust Developed Markets Small Cap AlphaDex Fund

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Latest News for First Trust Emerging Markets Small Cap AlphaDEX Fund (NASDAQ:FEMS)

Monday, August 07, 2017

Thursday, March 08, 2012