First Trust Large Cap Core AlphaDEX Fund (NASDAQ: FEX)

First Trust Large Cap Core AlphaDEX Fund (NASDAQ:FEX), Quote.Headers.trade-ideas

First Trust Large Cap Core AlphaDEX Fund

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The Fund will normally invest at least 90 percent of its net assets (including investment borrowings) in the securities that comprise the Index. The Fund, using an indexing investment approach, attempts to replicate, before fees and expenses, the performance of the Index. The Index is owned and is developed, maintained and sponsored by Nasdaq, Inc. (the Index Provider). The Index Provider may, from time to time, exercise reasonable discretion as it deems appropriate in order to maintain Index integrity.

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Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Large Cap Core AlphaDEX ETF (NASDAQ: FEX) provides investors broad exposure to the Style Box - Large Cap Blend category of the market.

Is First Trust Large Cap Core AlphaDEX ETF a Strong ETF Right Now?

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Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Large Cap Core AlphaDEX ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/fex#NASDAQ">FEX</a>) provides investors broad exposure to the Style Box - Large Cap Blend category of the market.
<h2>What Are Smart Beta ETFs?</h2>
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
<h2>Fund Sponsor &amp; Index</h2>
Because the fund has amassed over $1.22 billion, this makes it one of the larger ETFs in the Style Box - Large Cap Blend. FEX is managed by First Trust Advisors. FEX, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Large Cap Core Index.
The NASDAQ AlphaDEX Large Cap Core Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index.
<h2>Cost &amp; Other Expenses</h2>
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.60%.
The fund has a 12-month trailing dividend yield of 1.19%.
<h2>Sector Exposure and Top Holdings</h2>
It is important to delve into an ETF&#39;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.
For FEX, it has heaviest allocation in the Industrials sector --about 16.70% of the portfolio --while Financials and Information Technology round out the top three.
Taking into account individual holdings, Nvidia Corporation accounts for about 0.62% of the fund&#39;s total assets, followed by Vistra Corp. and Crowdstrike Holdings, Inc.
Its top 10 holdings account for approximately 5.26% of FEX&#39;s total assets under management.
<h2>Performance and Risk</h2>
So far this year, FEX has added about 9.35%, and is up about 16.57% in the last one year (as of 08/15/2024). During this past 52-week period, the fund has traded between $76.85 and $100.86.
FEX has a beta of 1.05 and standard deviation of 16.93% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 376 holdings, it effectively diversifies company-specific risk.
<h2>Alternatives</h2>
First Trust Large Cap Core AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core S&amp;P 500 ETF (ARCA:IVV) tracks S&amp;P 500 Index and the SPDR S&amp;P 500 ETF&nbsp;tracks S&amp;P 500 Index. IShares Core S&amp;P 500 ETF has $499.77 billion in assets, SPDR S&amp;P 500 ETF has $550.61 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Blend.
<a href="https://www.zacks.com/stock/news/2322378/is-first-trust-large-cap-core-alphadex-etf-fex-a-strong-etf-right-now?cid=CS-BENZ-FT-smart_beta_etf-2322378">To read this article on Zacks.com click here.</a>

Here is the ETF Professor's ETF Watch List for Friday, August 23, 2013.

Give the Market Vectors Steel ETF (NYSE: <a class="ticker" href="/stock/slx#NYSE">SLX</a>) a look.

The SPDR EURO STOXX 50 ETF (NYSE: <a class="ticker" href="/stock/fex#NYSE">FEX</a>) looks interesting.

The PowerShares QQQ (NASDAQ: <a class="ticker" href="/stock/qqq#NASDAQ">QQQ</a>) will be in focus.

Emerging Markets plays of the day: iShares MSCI Brazil ETF (NYSE: <a class="ticker" href="/stock/ewz#NYSE">EWZ</a>), Market Vectors Egypt ETF (NYSE: <a class="ticker" href="/stock/egpt#NYSE">EGPT</a>) and the WisdomTree India Earnings ETF (NYSE: <a class="ticker" href="/stock/epi#NYSE">EPI</a>).

Forex play of the day: WisdomTree Emerging Currency ETF (NYSE: <a class="ticker" href="/stock/cew#NYSE">CEW</a>).

Bond play of the day: ProShares UltraShort 20+ Year Treasury (NYSE: <a class="ticker" href="/stock/tbt#NYSE">TBT</a>).

With the benefit of the broader market's recent sturdy performance, plenty of exchange-traded funds can be found within spitting distance of their 52-week highs. To be precise, nearly 670 ETFs, or almost half the entire exchange-traded products universe, currently reside with five percent or less of their 52-week highs.

Obviously, that is a lot of ETFs to sort through to find credible candidates exhibiting strong technicals without being overbought. To whittle the list down, a screen was run to find only those ETFs trading above their 20-, 50- and 200-day moving averages with relative strength index readings of 60 or below so as to include those ETFs that are not overbought. 

Using those parameters, 140 ETFs came back, still a healthy list. To pare the group down even further while ensuring the funds that came back would represent better yield plays than short-term cash instruments, a dividend yield of at least one percent was added. That cut the list down to 41. Not a large number, but enough to find some ETFs worth embracing even though they have already run higher.

First Trust Large Cap Core AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fex#NYSE">FEX</a>)
The First Trust Large Cap Core AlphaDEX Fund is not the typical large-cap broader market ETF on the market today. For starters, Netflix (NASDAQ: <a class="ticker" href="/stock/nflx#NASDAQ">NFLX</a>) is the fund's top holding. More importantly, FEX keeps with AlphaDEX tradition of eschewing traditional market capitalization weighting in favor of a deeper screening process.

Screening by growth factors such as price appreciation and value factors such as return assets, FEX is an almost 380-stock ETF where no individual holding represents more than 0.87 percent of the ETF's total weight. FEX is also diverse at the sector level as five industry groups – consumer discretionary, industrials, energy, technology and financials – receive double-digit allocations. 

Thirty-day average daily volume of less than 70,000 shares might imply lower liquidity with FEX, but that assumption would be inaccurate. Not only are the bulk of the ETF's underlying holdings robustly traded, but FEX rarely trades <a href="http://www.ftportfolios.com/Retail/Etf/EtfPriceHistory.aspx?Ticker=FEX">uncomfortably above the midpoint of its bid/ask spread</a>. FEX is currently just 0.9 percent below its 52-week high.

Guggenheim Multi-Asset Income ETF (NYSE: <a class="ticker" href="/stock/cvy#NYSE">CVY</a>)
The Guggenheim Multi-Asset Income ETF may not be as large as some of the more well-known dividend ETFs out there, but it is by no means small. Nearly $909 million in assets under management affirms as much. More importantly, CVY makes good on its name and provides investors exposure to several high-yielding asset classes under one roof.

Yes, CVY is home to common stocks such as Norfolk Southern (NYSE: <a class="ticker" href="/stock/nsc#NYSE">NSC</a>) and Gannett (NYSE: <a class="ticker" href="/stock/gci#NYSE">GCI</a>), but the ETF also features Canadian royalty trusts, closed-end funds, MLPs, REITs, preferred and foreign stocks among its lineup. The result is a trailing 12-month yield of almost 5.1 percent.

Conservative investors will like the fact that CVY is not exceptionally volatile with a beta of 0.97 and a standard deviation of 12.37 percent, <a href="http://guggenheiminvestments.com/products/etf/cvy">according to Guggenheim data</a>. CVY is up 7.2 percent year-to-date and is currently trading just 0.6 percent below its 52-week high.

Global X FTSE Nordic Region ETF (NYSE: <a class="ticker" href="/stock/gxf#NYSE">GXF</a>)
Southern Europre has again shown it can be a volatile place to invest. Recent challenging headlines include Spain's astronomical unemployment rate, pressure on Italian equities following that country's elections and <a href="http://www.benzinga.com/trading-ideas/long-ideas/13/03/3386703/greece-etf-down-on-emerging-markets-demotion">Greece's demotion to emerging markets status</a>.

That type of news flow reminds investors that the Nordic region remains an area of strength in Europe. It is not surprising to see the Global X FTSE Nordic Region ETF on this list, particularly because the iShares MSCI Sweden Index Fund (NYSE: <a class="ticker" href="/stock/ewd#NYSE">EWD</a>) and the Global X Norway ETF (NYSE: <a class="ticker" href="/stock/norw#NYSE">NORW</a>) are flirting with new 52-week highs as well. Sweden and Norway combine for over 69 percent of GXF's weight.

Do not sleep on GXF's 20.6 percent allocation to Denmark, either. Danish equities have performed well this year and the country, like Sweden and Norway, is not a Eurozone member, perhaps adding to the bull case for investing in Denmark. As for GXF, it is just pennies away from a new high and if the ETF breaks through resistance at $22, that could represent a breakout.

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

Among the prominent trends in the ETF industry this year has been the realization by advisors, investors and traders that traditional cap-weighted funds are not always the best when it comes to returns. Still, most equity-based ETFs are just that: Weighted by the market values of the funds' underlying components.

Traditional cap-weighted methodologies are particularly common with broad market ETFs such as the SPDR S&amp;P 500 (NYSE: <a class="ticker" href="/stock/spy#NYSE">SPY</a>) and the PowerShares QQQ (NASDAQ: <a class="ticker" href="/stock/qqq#NASDAQ">QQQ</a>). However, there are alternative strategies that have proven to be solid in terms of delivering returns with FirstTrust's AlphaDEX suite being home to some broad market fare that investors may want to consider over more common cap-weighted fare.

In a research note out Thursday, Street One Financial Vice President Paul Weisbruch highlights three AlphaDEX ETFs that represent valid alternatives to traditional broad market ETFs.

One example is the First Trust Large Cap Core AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fex#NYSE">FEX</a>), which tracks the Defined Large Cap Core Index. That index screens the S&amp;P based on a variety of growth and value factors, including three, six and 12-month price appreciation, sales to price, one year sales growth, book value to price, cash flow to price and return on assets, <a href="http://www.ftportfolios.com/Retail/Etf/EtfSummary.aspx?Ticker=FEX">according to First Trust</a>.

The result is an ETF with the top 75 percent of the S&amp;P 500 and a fund that is far from cap-weighted as GameStop (NYSE: <a class="ticker" href="/stock/gme#NYSE">GME</a>), Ford (NYSE: <a class="ticker" href="/stock/f#NYSE">F</a>) and Aetna (NYSE: <a class="ticker" href="/stock/aet#NYSE">AET</a>) are among FEX's top-10 holdings. What is important to note, as Weisbruch points out, is that since coming to market in May 2007, FEX has outperformed SPY. In fact, the First Trust offering has generated positive returns over that time while SPY is in the red. Today, FEX has almost $345 million in assets under management.

A similar situation is found with the First Trust Mid Cap Core AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fnx#NYSE">FNX</a>) and the SPDR S&amp;P MidCap 400 ETF (NYSE: <a class="ticker" href="/stock/mdy#NYSE">MDY</a>). 

FNX's approach mirrors that of FEX, but in this case the index tracked is the Defined Mid Cap Core Index and the ETF's constituents are the top 75 percent of the S&amp;P MidCap 400 Index. FNX came to market on the same day in May 2007 as FEX and its ability to outperform rival funds such as MDY has been impressive.

Since its debut, FNX has outpaced MDY by over 950 basis points, though MDY has been the winner over the past 12 months. FNX has over $303 million in assets.

The scenario repeats at the small-cap level as the First Trust Small Cap Core AlphaDEX (NYSE: <a class="ticker" href="/stock/fyx#NYSE">FYX</a>) has outpaced the iShares Core S&amp;P Small-Cap ETF (NYSE: <a class="ticker" href="/stock/ijr#NYSE">IJR</a>) since May 2007. FYX's constituents are pulled from the S&amp;P SmallCap 600 Index, the same index tracked by IJR. Since inception, "FYX has outpaced the S&amp;P 600 SmallCap Index 11.65% versus 8.08%," according to Chojnacki.

"As one might imagine, a fundamentally weighted index would vary significantly head to head against a market cap weighted index (calculated by share price times shares outstanding) in terms of individual equity weightings. Since inception in 2007, based on live returns in these ETFs, First Trust has demonstrated thus far that notable value can be added in an alternative weighting methodology to the market cap," said Weisbruch.

For more on AlphaDex ETFs, click <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/10/2971334/alphadex-etfs-do-things-differently-with-stellar-results">here</a>.

AlphaDEX Alternatives to Cap-Weighted ETFs Prove Their Mettle

Earnings

Guidance

Flextronics Guides Q3 EPS $0.18-0.22 vs $0.26 Est; Guides Q3 Revenue $5.8-6.2B vs $6.35B Est

The U.S. postal service is looking to close nearly half of its mail processing plants and eliminate about 5% of its workforce to increase profitability.
The postal service, which is expected to report an annual loss of $18.2 billion by 2015, is attempting to cut out $15 billion in by shutting 223 of its 461 plants, cutting about 35,000 jobs.

The agency is looking at other cost-saving measures, including asking for a 5 cent raise in first class postage costs, making the price for a standard letter 50 cents. The office is also seeking congressional permission to end Saturday delivery as correspondence moves to the internet.

The agency lost $33 billion in the fourth quarter, which included the busy holiday season. At the end of the fourth quarter there were about 650,000 people employed by the agency. The anticipated cuts will be 30,000 full-time positions and 5,000 temporary positions, which don't include full benefits.

There is at least one processing center in the consolidating process in each state, except Alaska and Hawaii, according to a list from the postal service. Even states without processing center changes may see employment changes as the postal service looks to have the facilities run 18 hours a day, compared to the 10 to 12 hours a day they currently run, to improve efficiency.

There is no method to prevent mail-processing center closings, as there is for post offices which have an appeals process by which challenges can be brought. The post office does not require permission from Congress, as it does to increase stamp rates, decrease delivery days or change insurance plans. 
 
As post office delivery days decrease traffic may shift to shipping companies such as UPS (NYSE: <a class="ticker" href="/stock/ups#NYSE">UPS</a>) or FedEx (NYSE: <a class="ticker" href="/stock/fex#NYSE">FEX</a>). UPS stock has risen about $2 this year to $76.64 at the end of the day yesterday, as FedEx stock rose about $7 to $91.97. The two stocks have been pushed higher amid rumors that either company could buy TNT Express (NYSE: <a class="ticker" href="/stock/tntey#NYSE">TNTEY</a>), a Netherlands-based shipping company. The company rejected a $6.43 billion offer from UPS earlier this week and has not received an official offer from FedEx.

TNTEY

US Postal Service cuts jobs, processing plants, in bid to return to profitability 

The U.S. postal service is looking to close nearly half of its mail processing plants and eliminate about 5% of its workforce to increase profitability.
The postal service, which is expected to report an annual loss of $18.2 billion by 2015, is attempting to cut out $15 billion in by shutting 223 of its 461 plants, cutting about 35,000 jobs.

The agency is looking at other cost-saving measures, including asking for a 5 cent raise in first class postage costs, making the price for a standard letter 50 cents. The office is also seeking congressional permission to end Saturday delivery as correspondence moves to the internet.

The agency lost $33 billion in the fourth quarter, which included the busy holiday season. At the end of the fourth quarter there were about 650,000 people employed by the agency. The anticipated cuts will be 30,000 full-time positions and 5,000 temporary positions, which don't include full benefits.

There is at least one processing center in the consolidating process in each state, except Alaska and Hawaii, according to a list from the postal service. Even states without processing center changes may see employment changes as the postal service looks to have the facilities run 18 hours a day, compared to the 10 to 12 hours a day they currently run, to improve efficiency.

There is no method to prevent mail-processing center closings, as there is for post offices which have an appeals process by which challenges can be brought. The post office does not require permission from Congress, as it does to increase stamp rates, decrease delivery days or change insurance plans. 
 
As post office delivery days decrease traffic may shift to shipping companies such as UPS (NYSE: <a class="ticker" href="/stock/ups#NYSE">UPS</a>) or FedEx (NYSE: <a class="ticker" href="/stock/fex#NYSE">FEX</a>). UPS stock has risen about $2 this year to $76.64 at the end of the day yesterday, as FedEx stock rose about $7 to $91.97. The two stocks have been pushed higher amid rumors that either company could buy TNT Express (NYSE: <a class="ticker" href="/stock/tntey#NYSE">TNTEY</a>), a Netherlands-based shipping company. The company rejected a $6.43 billion offer from UPS earlier this week and has not received an official offer from FedEx.

Austerity in Greece has dragged stocks lower as Greek Prime Minister Lucas Papademos agrees with political leaders in his country to cut government costs in accordance with the wishes of foreign creditors. The deal should be worth €130 billion (about $171 billion) for the Greek government.
According to the agreement, which is still in its early stages and not complete, the country will reduce its budget by 1.5% of the country's GDP in one of the biggest austerity moves to come from a PIIGS economy in recent memory. The austerity measures include wage reductions for public workers and efforts to make the country more competitive for foreign direct investment. Pensions and bank recapitazliations are also issues of focus for the new agreement.
That amount is a fraction of the country's total credit obligations abroad.
Stocks fell in European markets as the deadline for Greek debt looms. Credit Agricole (EPA: ACA) fell by 4% in morning trading, and Societé Generale (EPA: GLE) was not far behind with a loss of 3.81%. Most other European banks are down on the news, while futures on the S&amp;P 500 were down slightly.
The early-morning fall continues the protracted volatility that has plagued Europe for over a year, as sovereign debt remains an uncertain and sensitive point for European economies. The internal agreement between Papademos and Greek leaders is tentative, so investors may be worrying that the deal will fall through.
<div id="action-items">
ACTION ITEMS:

Bullish: 
Traders who believe that the news will bode well for U.S. markets might want to consider the following trades: 
<ul>
<li>Investment banks tend to reflect moves in Europe, so Goldman Sachs (NYSE: <a class="ticker" href="/stock/gs#NYSE">GS</a>), JPMorgan (NYSE: <a class="ticker" href="/stock/jpm#NYSE">JPM</a>), and Morgan Stanley (NYSE: <a class="ticker" href="/stock/ms#NYSE">MS</a>) should reflect the news, even if their investment in Europe is limited.</li>
<li>A European ETF such as the Dow Jones EURO STOXX 50 (NYSE: <a class="ticker" href="/stock/fex#NYSE">FEX</a>) or the iShares S&amp;P Europe 350 (NYSE: <a class="ticker" href="/stock/iev#NYSE">IEV</a>) may become more affordable on today's news, so investors bullish on Europe for the long term might consider buying into them if they fall on today's news.</li>
</ul>


Bearish: 
Traders who think that today will be a bearish day in America may want to think about some alternatives: 
<ul>
<li>Shorting the above ETFs, or shorting Credit Agricole, Societé Generale, or BNP Paribas (EPA: BNP) may be in order.</li>
<li>If European drama is too much for your blood pressure, divestment from the continent may be in order. Some traditional banks have already made that move, with a turn to domestic opportunities. Bank of America (NYSE: <a class="ticker" href="/stock/bac#NYSE">BAC</a>) and Wells Fargo (NYSE: <a class="ticker" href="/stock/wfc#NYSE">WFC</a>) have led the pack towards domestic conventional banking revenues, so a closer look at them may be in order.</li>
</ul>
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.
</div>

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First Trust Large Cap Core AlphaDEX Fund

Overview

First Trust Large Cap Core AlphaDEX Fund (NASDAQ:FEX), Quote.Headers.trade-ideas