First Trust Health Care AlphaDEX (ARCA: FXH)

First Trust Health Care AlphaDEX (ARCA:FXH), Quote.Headers.trade-ideas

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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 part of the StrataQuant Series, a family of custom enhanced indices developed, maintained and owned by ICE Data Indices, LLC or its affiliates (IDI or the Index Provider). The Index Provider reserves the right to, at any time, change the number of stocks comprising the Index by adding or deleting one or more stocks, or replacing one or more stocks contained in the Index with one or more substitute stocks of its choice, if in the Index Providers discretion, such addition, deletion or substitution is necessary or appropriate to maintain the quality and/or character of the Index.

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A proposed regulatory shift has injected uncertainty into the laboratory-testing market just as startups advance various tests to detect diseases sooner and personalize treatments.

Lab-Developed Tests Under FDA Scrutiny: What It Means For Startups

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Goldman Sachs compiled research suggesting the global pharmaceutical sector has approximately $700 billion available for M&amp;A and investments.

This significant financial reserve will be crucial as patents for some of the industry&#39;s blockbuster drugs are on the expiration cliff.

From AI to Obesity Drugs - Global Pharma Has $700B For M&amp;A and Investments: Goldman Sachs

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A proposed regulatory shift has injected uncertainty into the laboratory-testing market just as startups advance various tests to detect diseases sooner and personalize treatments.
Startups seizing advances in fields such as genomics and artificial intelligence are designing laboratory-developed tests to spot cancer and other illnesses before symptoms arise and to identify optimal therapies.
Lab-developed tests are created and carried out in a single lab.&nbsp;
Labs perform these tests on blood or other specimens shipped to them. Most genetic tests, for example, are lab-developed tests.
The FDA says it historically has exercised its discretion not to regulate such tests, thus allowing startups to introduce the tests quickly and at relatively low cost.
That would change under a proposal the FDA&nbsp;<a class="editor-rtfLink" href="https://www.fda.gov/medical-devices/in-vitro-diagnostics/laboratory-developed-tests" style="color:#4a6ee0; background:transparent; margin-top:0pt; margin-bottom:0pt" target="_blank">issued</a>&nbsp;Friday. The agency, citing concerns about the efficacy of lab-developed tests, said it plans to regulate these diagnostics.&nbsp;
As a result, many lab-developed tests would require review by the FDA before they can be sold.
But the agency&rsquo;s latest salvo leaves lab companies with less certainty about future regulation, complicating investment and product-development decisions, Wall Street Journal&nbsp;<a class="editor-rtfLink" href="https://www.wsj.com/articles/fda-proposal-casts-cloud-over-startups-in-lab-testing-market-57702b2f?mod=latest_headlines" style="color:#4a6ee0; background:transparent; margin-top:0pt; margin-bottom:0pt" target="_blank">noted</a>, citing some observers.
&ldquo;If the path to market becomes longer, less predictable and more expensive, that will affect our ability to invest and will affect the number of new diagnostics that come to market,&rdquo; said&nbsp;Greg Yap, a partner with venture firm Menlo Ventures.
For a startup, performing all tests in its lab appeals because that can simplify quality control, especially for new and complex diagnostics.
In the 1970s and 1980s, the FDA said, many lab-developed tests were lower-risk and used for specialized needs of local populations.&nbsp;
Today, they are applied much more widely, and modern lab tests pose more risks, according to the agency. It noted it is aware of lab-developed tests that led to over- or under-treatment for heart disease, patients being exposed to inappropriate therapies or not getting effective therapies, and incorrect diagnoses of diseases, including Alzheimer&rsquo;s.
The FDA proposes regulating lab-based tests as medical devices, which may impact costs and insurance reimbursements.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Goldman Sachs&nbsp;compiled research suggesting the global pharmaceutical sector has approximately $700 billion available for M&amp;A and investments.
This significant financial reserve will be crucial as patents for some of the industry&#39;s blockbuster drugs are on the expiration cliff.
The pharmaceutical industry is experiencing strong interest in M&amp;A due to anticipated revenue erosion of approximately $200 billion by the end of the decade.
The latest examples include&nbsp;Astellas Pharma Inc&nbsp;(OTC: <a class="ticker" href="https://www.benzinga.com/stock/alpmy#OTC">ALPMY</a>) acquiring American firm&nbsp;Iveric Bio Inc&nbsp;(NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/isee#NASDAQ">ISEE</a>)&nbsp;<a class="editor-rtfLink" href="https://www.benzinga.com/general/biotech/23/05/32112605/astellas-pharma-acquires-iveric-bio-for-5-9b-to-focus-on-blindness-regeneration" style="color:#4a6ee0; background:transparent; margin-top:0pt; margin-bottom:0pt" target="_blank">for $5.9 billion</a>,&nbsp;Pfizer Inc&nbsp;(NYSE: <a class="ticker" href="https://www.benzinga.com/stock/pfe#NYSE">PFE</a>)&nbsp;<a class="editor-rtfLink" href="https://www.benzinga.com/general/biotech/23/03/31319372/seagens-43b-deal-to-double-pfizers-early-stage-oncology-pipeline-seagen-says-is-right-step" style="color:#4a6ee0; background:transparent; margin-top:0pt; margin-bottom:0pt" target="_blank">proposing a $43 billion</a>&nbsp;acquisition of&nbsp;Seagen Inc&nbsp;(NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/sgen#NASDAQ">SGEN</a>),&nbsp;GSK plc&nbsp;(NYSE: <a class="ticker" href="https://www.benzinga.com/stock/gsk#NYSE">GSK</a>) agreeing to acquire&nbsp;BELLUS Health Inc&nbsp;(NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/blu#NASDAQ">BLU</a>)&nbsp;<a class="editor-rtfLink" href="https://www.benzinga.com/general/biotech/23/04/31847715/gsk-to-strengthen-specialty-medicines-and-respiratory-pipeline-with-2b-bellus-health-acquisition" style="color:#4a6ee0; background:transparent; margin-top:0pt; margin-bottom:0pt" target="_blank">for $2 billion</a>, and&nbsp;Merck &amp; Co Inc&nbsp;(NYSE: announcing to acquire&nbsp;Prometheus Biosciences Inc&nbsp;(NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/rxdx#NASDAQ">RXDX</a>)&nbsp;<a class="editor-rtfLink" href="https://www.benzinga.com/markets/equities/23/04/31825415/merck-acquires-prometheus-biosciences-for-10-8b-strengthening-its-immunology-pipeline" style="color:#4a6ee0; background:transparent; margin-top:0pt; margin-bottom:0pt" target="_blank">for $10.8 billion</a>.
Obesity drugs are generating significant investor enthusiasm, with forecasts suggesting a total addressable market&nbsp;<a class="editor-rtfLink" href="https://www.benzinga.com/general/biotech/23/05/32317535/obesity-drug-achieves-15-weight-loss-zealand-pharma-boehringer-ingelheim-partnered-drug-may-compe" style="color:#4a6ee0; background:transparent; margin-top:0pt; margin-bottom:0pt" target="_blank">exceeding $100 billion</a>.
Promising developments in Alzheimer&#39;s, gene therapy, and other therapeutic modalities were discussed at the conference, indicating substantial innovation and scientific progress in these areas.
The healthcare sector had a challenging start to 2023, recording one of the worst first-half performances in three decades. Factors contributing to this include regulatory &amp; growth concerns, macroeconomic rotations, and investor preference for large-cap technology stocks. Sentiment within the sector remains cautious.
The application of AI and machine learning in healthcare remains an area of interest. Companies are witnessing the positive impact of these&nbsp;<a class="editor-rtfLink" href="https://www.benzinga.com/general/biotech/23/06/33039774/ai-in-medical-field-hong-kong-company-takes-first-ai-generated-drug-candidate-to-clinic-targeting" style="color:#4a6ee0; background:transparent; margin-top:0pt; margin-bottom:0pt" target="_blank">technologies on their businesses</a>.
Despite the general caution, there are pockets of&nbsp;<a class="editor-rtfLink" href="https://www.goldmansachs.com/intelligence/pages/pharmaceutical-companies-have-700-billion-for-acquisition.html" style="color:#4a6ee0; background:transparent; margin-top:0pt; margin-bottom:0pt" target="_blank">optimism</a>. Management teams across various healthcare verticals reported strong Q2 procedure volumes, and in the investor survey, medical devices were identified as the most likely area to outperform.&nbsp;
Consumer-facing healthcare segments also demonstrated positivity, with robust demand and continued patient traffic recovery. The biopharma sector shows promise with promising innovation trends.
Policy and regulatory uncertainties emerged as a key concern in several presentations. The Inflation Reduction Act and its impact on drug pricing created&nbsp;<a class="editor-rtfLink" href="https://www.benzinga.com/general/biotech/23/06/33081487/biden-administration-releases-revised-guidance-for-medicare-drug-price-negotiation-amid-industry-" style="color:#4a6ee0; background:transparent; margin-top:0pt; margin-bottom:0pt" target="_blank">various uncertain outcomes</a>.
Post-pandemic normalization trends continue to pose challenges for life sciences, tools, and managed care companies, which were beneficiaries during the pandemic.
Photo by Sharon McCutcheon on Unsplash

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Rydex ETF Trust Rydex S&P Equal Weight Health ETF

From AI to Obesity Drugs - Global Pharma Has $700B For M&A and Investments: Goldman Sachs

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Top Wall Street Bets Mentions for Tuesday December 20, 2022: TSLA, AAPL, AMZN, PLTR, GME, NVDA, AMC, NKE, HOOD, FXH

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Momentum, an investment factor rooted in the idea that a security that has already appreciated in price can continue doing so, makes a predictable candidate to overshoot declines when the broad market declines.
When it comes to momentum-based exchange traded funds, however, various funds apply momentum in different ways, creating significant performance-level differences.
<h3>What Happened</h3>
The iShares Edge MSCI USA Momentum Factor ETF (CBOE:MTUM) recently boosted its allocation to technology stocks to almost 40 percent of its weight, more than triple its weight to health care, its second-largest sector weight. Even with that increased tech exposure, MTUM is down about 1.60 percent in May, far better than the 5 percent shed by the S&amp;P 500.
&ldquo;Using momentum ETFs, investors can gain some diversification using this approach, but it is important to understand the exposure is not static and that momentum funds can be quite different,&rdquo; said <a href="https://www.cfraresearch.com/">CFRA Research</a> Director of ETF &amp; Mutual Fund Research Todd Rosenbluth in a note out Thursday.
Rosenbluth has an Overweight rating on the $8.55 billion MTUM, which tracks the MSCI USA Momentum Index.
<h3>Why It&#39;s Important</h3>
The First Trust Dorsey Wright Focus 5 ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/fv#NASDAQ">FV</a>) is another momentum-based ETF. FV adheres to Dorsey, Wright &amp; Associates (DWA) relative strength methodology and has a selection universe consisting of First Trust industry and sector funds.
Recently, FV removed the First Trust Health Care AlphaDEX Fund (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/fxh#NYSE">FXH</a>), a health care ETF heavy on the sector&#39;s growth industries, in favor of the more conservative First Trust AlphaDEX Utilities Fund (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/fxu#NYSE">FXU</a>).
&ldquo;But while MTUM invests in stocks with strong price momentum, the $2.4 billion FV holds equal stakes in five sector or industry ETFs offered by First Trust with the best relative strength,&rdquo; said Rosenbluth. &ldquo;The analysis used for FV is conducted twice monthly, but ETFs are replaced when they fall sufficiently out of favor, which helps to limit turnover.&rdquo;
<h3>What&#39;s Next</h3>
Although FXU is FV&#39;s largest holdings, the four other ETFs residing in FV are biotechnology, Internet and technology funds, indicating the fund is hardly defensive and explaining why FV is lower by nearly 7 percent this month.
CFRA has an Overweight rating on MTUM and does not rate FV.
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The First Trust Dorsey Wright Focus 5 ETF (NASDAQ: <a class="ticker" href="/stock/fv#NASDAQ">FV</a>), one of the most popular funds using the ETF of ETFs strategy, recently made another change among its five holdings.

	FV&#39;s<a href="http://www.ftportfolios.com/Retail/Etf/EtfHoldings.aspx?Ticker=FV"> holdings page </a>shows the First Trust Energy AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fxn#NYSE">FXN</a>) as FV&#39;s fifth-largest holding at a weight of 19.8 percent. That means FV has sent the First Trust Health Care AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fxh#NYSE">FXH</a>) packing.&nbsp;

	Flows data confirm as much. From March 23 through March 29, FXN added $680.1 million in new assets, more than any other ETF over that period, according to <a href="http://www.etf.com/etfanalytics/etf-fund-flows-tool">ETF.com</a> data. Conversely, FXH lost $562.3 million in assets during that stretch, more than all but one ETF.&nbsp;

	FV turned two earlier this month and had not changed its lineup until last month when it dumped the First Trust NYSE Arca Biotechnology Index Fund (NYSE: <a class="ticker" href="/stock/fbt#NYSE">FBT</a>) for the First Trust Utilities AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fxu#NYSE">FXU</a>). That move came after a massive decline for FBT.

	A similar though not as drastic scenario is seen with FV&#39;s healthcare-for-energy swap with FXN replacing FXH. FXH, the healthcare ETF, has long had a significant portion of its lineup in biotech stocks. Like more traditional, diversified healthcare ETFs, FXH was not immune to the biotech sector&#39;s tumble that started last year. Even with a 4.6 percent gain over the past month, FXH is down nearly 19 percent over the past year.

	That means the ETF is still close to meeting the definition of a bear market. While FV is not a market timing ETF, it is not unreasonable to assume of the fund&#39;s devotees, of which there are plenty given its $3.4 billion in assets, are wondering why it takes so long to part with losing positions like FBT and FXH. Frankly, those positions got worse and worse <a href="http://www.benzinga.com/trading-ideas/long-ideas/16/02/6224696/popular-etf-of-etfs-gets-defensive-after-market-slide">before FV moved out of them</a>.

	Those are just two examples and here is another. From its 2015 peak to its 2016 trough, the First Trust Dow Jones Internet Index Fund (NYSE: <a class="ticker" href="/stock/fdn#NYSE">FDN</a>), FV&#39;s largest holding, lost more than 28 percent but the Internet fund was not removed from FV.

	In fact, since FV debuted, FDN has experienced multiple corrections (defined as a drop of 10 percent or more) and at least one bear market (albeit temporary) and the Internet fund has never left FV.

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Focus 5 ETF Makes Another Change

The First Trust Dorsey Wright Focus 5 ETF (First Trust Exchange Traded Fund VI (NASDAQ: <a class="ticker" href="/stock/fv#NASDAQ">FV</a>)), one of the stars of 2014&#39;s crop of rookie exchange-traded funds, now has a dynamic counterpart with last week&#39;s launch of the First Trust Dorsey Wright Dynamic Focus 5 ETF (NASDAQ: FVC).
Like FV, the First Trust Dorsey Wright Dynamic Focus 5 ETF holds, in order, the First Trust Consumer Disry Alpha Fnd (ETF) (NYSE: <a class="ticker" href="/stock/fxd#NYSE">FXD</a>), First Trust DJ Internet Index Fund (ETF) (NYSE: <a class="ticker" href="/stock/fdn#NYSE">FDN</a>), First Trust Cnsumer Stapl Alpha Fd (ETF) (NYSE: <a class="ticker" href="/stock/fxg#NYSE">FXG</a>), First Trust Utilities AlphaDEX Fnd (ETF) (NYSE: <a class="ticker" href="/stock/fxu#NYSE">FXU</a>) and the First Trust Health Care AlphaDEX Fd(ETF) (NYSE: <a class="ticker" href="/stock/fxh#NYSE">FXH</a>).
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<h3>The Differences Between FV And FVC</h3>
While those ETFs represent all of FV&#39;s lineup, they combine for about 60 percent of the new FVC. The rest of FVC&#39;s lineup is allocated to <a href="http://www.ftportfolios.com/Retail/Etf/EtfHoldings.aspx?Ticker=FVC">short-term U.S. T-bills</a>.
The relative strength analysis for FVC&#39;s equity ETFs is conducted on a bi-monthly basis as is the analysis for the ETF&#39;s cash holdings, according to Illinois-based <a href="http://www.ftportfolios.com/LoadContent/gr3ukptsgaho">First Trust</a>.
Though FV is considered a passively managed ETF, relative strength analysis of its constituent ETFs is conducted weekly, meaning if one (or more) of the holdings tumble enough, they can be removed from FV and replaced with other First Trust sector and industry funds displaying better relative strength traits.
FV&#39;s ability to change holdings was on display earlier this year when it dumped the First Trust NYSE Arca Biotchnlgy Indx Fd (NYSE: <a class="ticker" href="/stock/fbt#NYSE">FBT</a>) in favor of FXU. However, that move left many FV investors what took so long as FV endured a massive slide in biotech stocks before parting ways to with FBT.
FVC has its work cut out for it when it comes to competing with FV, which has over $3.4 billion in assets under management. However, the new FVC is slightly less expensive than FV, as the former charges 0.79 percent per year, or $79 for each $10,000 invested, compared with FV&#39;s annual expense ratio of 0.89 percent.
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The First Trust Dorsey Wright Focus 5 ETF (First Trust Exchange Traded Fund VI (NASDAQ: <a class="ticker" href="/stock/fv#NASDAQ">FV</a>)) is reportedly dumping some of its riskier holdings in favor of more conservative fare as the S&amp;P 500 has tumbled 8 percent year to date.
<h3>FV Is An ETF Of ETFs</h3>
Since coming to market in March 2014, FV has held the same five First Trust industry and sector ETFs. Those funds are as follows:
<ul>
<li>First Trust NYSE Arca Biotchnlgy Indx Fd (NYSE: <a class="ticker" href="/stock/fbt#NYSE">FBT</a>)</li>
<li>First Trust DJ Internet Index Fund (ETF) (NYSE: <a class="ticker" href="/stock/fdn#NYSE">FDN</a>)</li>
<li>First Trust Cnsumer Stapl Alpha Fd (ETF) (NYSE: <a class="ticker" href="/stock/fxg#NYSE">FXG</a>)</li>
<li>First Trust Health Care AlphaDEX Fd(ETF) (NYSE: <a class="ticker" href="/stock/fxh#NYSE">FXH</a>)</li>
<li>First Trust Cnsmer Disry Alpha Fnd (ETF) (NYSE: <a class="ticker" href="/stock/fxd#NYSE">FXD</a>)</li>
</ul>

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That was FV&#39;s lineup as of February 4, according to <a href="http://www.ftportfolios.com/Retail/Etf/EtfHoldings.aspx?Ticker=FV">First Trust data</a>.
<h3>An Appreciated Switch</h3>
Citing market evidence and ETF market makers,<a href="http://blogs.barrons.com/focusonfunds/2016/02/05/big-dorsey-wright-etf-gets-defensive-after-sharp-drop/"> Barron&#39;s</a> reported FV made its first change last week, swapping out of FBT for the First Trust Utilities AlphaDEX Fnd (ETF) (NYSE: <a class="ticker" href="/stock/fxu#NYSE">FXU</a>). The change is welcome, but it probably also leaves FV investors wondering what took so long.
FBT, the second-largest biotech ETF by assets, has lost a third of its value in the past six months and more than 24 percent in just the past month. Market data suggest the Barron&#39;s report about FV dumping FBT in favor of FXU is accurate. For example, FBT&#39;s volume swelled 17.1 million shares on Friday compared to the ETF&#39;s 90-day average of just over 531,300. FXU&#39;s Friday volume was a staggering 48.3 million compared to a 90-day average of less than 519,000 shares.
Though FV is considered a passively managed ETF, relative strength analysis of its constituent ETFs is conducted weekly, meaning if one (or more) of the holdings tumble enough, they can be removed from FV and replaced with other First Trust sector and industry funds displaying better relative strength traits.
<h3>The Bottom Line</h3>
FV, an ETF beloved by advisors and investors that are followers of Dorsey Wright&#39;s momentum-based, relative strength strategies, is home to over $3.6 billion in assets under management, making it one of the most successful ETFs to come to market in 2014. However, investors have pulled nearly $448 million from the ETF this year. 
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Popular ETF Of ETFs Gets Defensive After Market Slide

In what is turning out to be another stellar year of asset growth for the U.S. exchange traded products industry, some exchange traded funds are really standing out for their asset-gathering proficiency, including the First Trust Dorsey Wright Focus 5 ETF (NASDAQ: <a class="ticker" href="/stock/fv#NASDAQ">FV</a>).

	The First Trust Dorsey Wright Focus 5 ETF debuted in March 2014 and by the end of last year, it was the year&#39;s most successful new ETF, finishing 2014 with over $1 billion in assets under management. Adding $1 billion in assets in 12 months is impressive for any ETF, let alone a new fund, but keep in mind FV gained more than $1 billion in just under 10 months of trading.

	FV&#39;s asset growth is continuing unabated in 2015. Year-to-date, the ETF has added nearly $3.1 billion in new assets, easily putting it in the upper echelon of top asset-gathering ETFs this year. Now home to over $4.2 billion in assets, FV accounts for more than 10 percent of the $40.3 billion in ETF assets held by Illinois-based First Trust as of Oct. 20. The company is the&nbsp;<a href="http://www.etf.com/sections/etf-league-tables/etf-league-table-2015-10-20">sixth-largest U.S. ETF sponsor</a>.

	A fun fact as noted by <a href="http://streetonefinancial.com/">Street One Financial</a> Vice President Paul Weisbruch in a note out Wednesday is that FV is now First Trust&#39;s biggest ETF.&nbsp;

	&ldquo;Most ETF model managers and institutional users of ETFs are familiar with First Trust as a formidable ETF sponsor, but we will bet that little to none realize which fund of the company is currently the largest in terms of assets under management thanks to very strong asset flows year to date in terms of creation activity,&rdquo; said Weisbruch.

	FV&#39;s success sparked the creation of an international equivalent, the First Trust Dorsey Wright International Focus 5 ETF (NASDAQ: <a class="ticker" href="/stock/ifv#NASDAQ">IFV</a>), which is no slouch in the asset-gathering department. However, IFV has risks as does FV. For example, the recent and ongoing retrenchment experienced by biotechnology stocks has<a href="http://www.benzinga.com/trading-ideas/long-ideas/15/10/5922480/this-etf-will-work-until-it-doesnt">&nbsp;heavily weighed on FV</a>.

	The ETF holds five other First Trust industry and sector funds, including the First Trust NYSE Arca Biotechnology Index Fund (NYSE: <a class="ticker" href="/stock/fbt#NYSE">FBT</a>) and the First Trust Health Care AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fxh#NYSE">FXH</a>). Those ETF&#39;s combine for nearly 43 percent of FV&#39;s weight. Obviously, FBT is a dedicated biotech fund, but FXH also features a 9.3 percent biotech weight.

	&ldquo;In layman&rsquo;s terms, the firm Dorsey Wright whom is well known in the industry for their technical analysis studies and investment recommendations in the ETF universe based on such analytics, chooses various sector oriented First Trust ETFs based on momentum and relative strength rankings,&rdquo; adds Weisbruch.

	That biotech exposure is something to consider with FV and it explains the ETF&#39;s 90-day loss of 11.3 percent, more than double the loss suffered by the Nasdaq Composite over the same period. Additionally, FV could be facing a competitive threat.

	The PowerShares DWA Tactical Sector Rotation Portfolio (NASDAQ: <a class="ticker" href="/stock/dwtr#NASDAQ">DWTR</a>), which debuted less than two weeks ago, is something of a four-ETF competitor to FV and also uses the popular Dorsey Wright methodology. In less than two weeks, the PowerShares DWA Tactical Sector Rotation Portfolio has already gained&nbsp;<a href="http://www.benzinga.com/trading-ideas/long-ideas/15/10/5902268/the-final-four-new-etf-focuses-on-four-momentum-funds">$30.6 million in assets</a>.

DWTR

Focus 5 ETF Focuses On Massive Asset Growth

Plenty of exchange traded funds experienced acute volatility at the open of U.S. markets Monday and the First Trust Dorsey Wright Focus 5 ETF (NASDAQ: <a class="ticker" href="/stock/fv#NASDAQ">FV</a>) was no exception.

	FV, an ETF beloved by advisors and investors that are followers of Dorsey Wright&#39;s momentum-based, relative strength strategies, shows an intra-day range of $11.70 to $22.98. While that could speak to conspiracy theories of a mini &ldquo;flash crash&rdquo; for FV, charts for the ETFs five holdings all show similarly wild candles and wide intraday ranges.

	For example, the First Trust NYSE Arca Biotechnology Index Fund (NYSE: <a class="ticker" href="/stock/fbt#NYSE">FBT</a>) traded as low as $70, but now resides above $110 while the First Trust Health Care AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fxh#NYSE">FXH</a>) touched $44.41 before running back above $63. FBT and FXH are FV&#39;s two largest holdings, combining for more than <a href="http://www.ftportfolios.com/Retail/Etf/EtfHoldings.aspx?Ticker=FV">46 percent of FV&#39;s weight</a>.

	FV&#39;s other holdings are the First Trust Dow Jones Internet Index Fund (NYSE: <a class="ticker" href="/stock/fdn#NYSE">FDN</a>), First Trust Consumer Staples AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fxg#NYSE">FXG</a>) and the First Trust Consumer Discretionary AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fxd#NYSE">FXD</a>). Yes, that trio have also traded in jaw-dropping ranges.

	Monday&#39;s chaos not withstanding, FV&#39;s roster speaks to the ETF&#39;s vulnerability in the current market environment. Said another way, what drove the ETF higher for much of this year is now an albatross, that being significant biotech exposure. Not only is FBT, the second-largest biotech ETF by assets, FV&#39;s largest holding, but FXH, the AlphaDEX health care ETF, <a href="http://www.ftportfolios.com/Retail/Etf/EtfSummary.aspx?Ticker=FXH">has a 20.2 percent weight</a> to biotech stocks.
<h3>
	Another Problem</h3>

	Biotech is not the only problem for FV. The ETF&#39;s Internet exposure via FDN, also previously a selling point, has turned problematic. Nine of FDN&#39;s top 10 holdings, a group that combines for nearly 60 percent of that ETF&#39;s weight, are members of the Nasdaq Composite and that benchmark has tumbled 7.1 percent over the past month.

	Things have gotten so rough for momentum stocks and ETFs that over the past month, the best-performing member of FV&#39;s roster is FXG, the AlphaDEX consumer staples ETF, and that fund is still down 3.5 percent.

	However, there is a silver lining with FV. Though FV is considered a passively managed ETF, relative strength analysis of its constituent ETFs is conducted weekly, meaning if one (or more) of the holdings tumble enough, they can be removed from FV and replaced with other First Trust sector and industry funds displaying better relative strength traits.

	On that subject, it is interesting to note that FV debuted in March 2014, right before the albeit somewhat brief biotech and Internet meltdown experience that year, and the fund&#39;s holdings have yet to change.

A Wild Day For A Beloved Momentum ETF

This has been an excellent year in which to be long the health care sector.

	The Health Care Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xlv#NYSE">XLV</a>) and the Vanguard Health Care ETF (NYSE: <a class="ticker" href="/stock/vht#NYSE">VHT</a>) are up an average of 30.3 percent year-to-date and that is lousy compared to the 46.3 gain offered by the iShares Nasdaq Biotechnology ETF (NASDAQ: <a class="ticker" href="/stock/ibb#NASDAQ">IBB</a>).

	Biotechnology names have been stellar, so have blue-chip pharmaceuticals names such as Johnson &amp; Johnson (NYSE: <a class="ticker" href="/stock/jnj#NYSE">JNJ</a>). Bolstering the sector's <a href="http://www.benzinga.com/analyst-ratings/analyst-color/13/07/3753598/health-care-etfs-looking-healthy-ahead-of-earnings">healthy outlook</a> is the broad-based support coming sub-sectors such as medical devices, health insurance providers. Even small caps have gotten in on the act.

	Related: <a href="http://www.benzinga.com/analyst-ratings/analyst-color/13/07/3753855/dont-forget-about-this-small-cap-health-care-etf">Don't Forget About This Small-Cap Health Care ETF</a>.

	There are some health care ETFs that often go overlooked that merit investors' attention as well. Consider the following.

	iShares U.S. Pharmaceuticals ETF (NYSE: <a class="ticker" href="/stock/ihe#NYSE">IHE</a>) 
	When an ETF has over $492 million in assets under management as does the iShares U.S. Pharmaceuticals ETF, calling it "overlooked" is somewhat of a stretch. However, pure play pharmaceuticals ETFs are not nearly as heralded as their more diverse peers such as XLV and VHT. Those ETFs also feature biotech and medical devices stocks.

	IHE does not hold device makers, but some of its smaller holdings do qualify as biotech names. Just do not expect to find Amgen (NASDAQ: <a class="ticker" href="/stock/amgn#NASDAQ">AMGN</a>) and Gilead Sciences (NASDAQ: <a class="ticker" href="/stock/gild#NASDAQ">GILD</a>) because IHE lives its up to its billing as a U.S.-focused pharma play. That is good news for the conservative, yet indecisive investors. Can't decide among J&amp;J, Pfizer (NYSE: <a class="ticker" href="/stock/pfe#NYSE">PFE</a>) and friends?

	No problem because those stocks, Merck (NYSE: <a class="ticker" href="/stock/mrk#NYSE">MRK</a>), Bristol-Myers (NYSE: <a class="ticker" href="/stock/bmy#NYSE">BMY</a>) and Abbott (NYSE: <a class="ticker" href="/stock/abt#NYSE">ABT</a>) combine for 38 percent of IHE's weight. The ETF is up 28 percent this year.

	First Trust Health Care AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fxh#NYSE">FXH</a>) 
	The First Trust Health Care AlphaDEX Fund might be one of the quietest $1 billion ETFs on the market. More importantly, FXH stands as an example of how investors can benefit from considering alternative weighting methodologies.

	FXH offers broader exposure to biotechnology, health care providers and equipment makers as well pharmaceuticals names. That recipe is working as the fund is up 32.2 percent year-to-date, a performance that puts it ahead of XLV and VHT. So those that were bullish on FXH <a href="http://www.benzinga.com/trading-ideas/long-ideas/13/01/3221049/4-health-care-etfs-your-broker-forgot-to-mention">back in January</a> when the ETF had less than $630 million in assets now look quite prescient.

	Guggenheim S&amp;P 500 Equal Weight Health Care ETF (NYSE: <a class="ticker" href="/stock/ryh#NYSE">RYH</a>) 
	Yes, equal weighting <a href="http://www.benzinga.com/analyst-ratings/analyst-color/13/04/3543131/equal-weight-etf-trounces-traditional-s-p-500-peers">works at the sector level, too</a>. The Guggenheim S&amp;P 500 Equal Weight Health Care ETF is proof positive of that assertion with a year-to-date gain of nearly 29 percent.

	RYH is an equal-weight alternative to funds such as XLV and VHT and the differences shine through at the sub-sector level. The Guggenheim offering is split almost evenly between health care equipment, providers and pharmaceuticals names. Stocks range in weight from 1.37 percent to 2.22 percent and the fund's three largest holdings are all biotechnology stocks.

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

Pre-Market Outlook

AMGN

GILD

iShares Dow Jones US Pharmaceuticals Index Fund

Three Soaring, But Overlooked Health Care ETFs

Sectors lead the broader market, not the other way around. With U.S. stocks flirting with all-time highs, it is a good idea to identify leaders and laggards at the sector level. This exercise is also an excellent way for investors to take part in the ongoing debate about large ETFs and their often noticeable inability to outperform smaller equivalents.

Using the nine State Street Global Advisors Select Sector SPDRs as the measuring tools, investors will see that in terms of year-to-date returns, the Health Care Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xlv#NYSE">XLV</a>) and the Consumer Staples Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xlp#NYSE">XLP</a>) are the best year-to-date performers with gains of 11.3 and 10.7 percent, respectively, <a href="http://www.etfreplay.com/charts.aspx">according to ETF Replay data</a>.

The SPDR laggards are the Materials Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xlb#NYSE">XLB</a>) and the Technology Select Sector (NYSE: <a class="ticker" href="/stock/xlk#NYSE">XLK</a>) with returns of 3.4 and 4.6 percent, respectively. With those returns in mind, here are some of the sector ETFs that have been outperforming their SPDRs rivals in 2013.

First Trust Energy AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fxn#NYSE">FXN</a>)
In addition to health care and staples, energy has shown strong sector leadership to start 2013. Helped in large part by its 15 percent weight to Chevron (NYSE: <a class="ticker" href="/stock/cvx#NYSE">CVX</a>), which is up 9.6 percent year-to-date, the Energy Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xle#NYSE">XLE</a>) has gained nearly 9.3 percent since the start of the year.

Gaining 9.3 percent in just over two months is a return that most investors would not scoff at, but the First Trust Energy AlphaDEX Fund has done better. Try 100 basis points better. As is the case with the other AlphaDEX sector funds, is not a traditional market capitalization-weighted ETF. Rather, FXN holdings are selected based on growth factors such as price appreciation and value factors such as return on assets.

The result is an energy fund that is not excessively weighted to Exxon Mobil (NYSE: <a class="ticker" href="/stock/xom#NYSE">XOM</a>) and Chevron (NYSE: <a class="ticker" href="/stock/cvx#NYSE">CVX</a>) as XLE. In fact, Hess (NYSE: <a class="ticker" href="/stock/hes#NYSE">HES</a>) is FXN's largest holding with a weight of less than four percent. Now the question is can FXN outperform XLE and related ETFs for the rest of the year? The answer is "yes" if refiners such as Phillips 66 (NYSE: <a class="ticker" href="/stock/psx#NYSE">PSX</a>) and oil services names, a group that FXN is significantly more exposed to than XLE, continue soaring.

Guggenheim S&amp;P 500 Equal Weight Technology ETF (NYSE: <a class="ticker" href="/stock/ryt#NYSE">RYT</a>)
The inclusion of the Guggenheim S&amp;P 500 Equal Weight Technology ETF on this probably will not surprise those investors (practically everyone) that have heard about Apple's (NASDAQ: <a class="ticker" href="/stock/aapl#NASDAQ">AAPL</a>) stunning fall from grace. To review, Apple's run to the stratosphere last year meant the stock started dominating cap-weighted technology sector ETFs. 

That was nice on the way up, <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/04/2499691/apples-slide-exposes-flaws-in-some-etfs-aapl-qqq-iyw">but far from pleasant on the way down</a>. Apple's dramatically declining market value has trimmed its weight in XLK to 13.7 percent. Still, that is nearly 600 basis points higher than Google's (NASDAQ: <a class="ticker" href="/stock/goog#NASDAQ">GOOG</a>) weight within the fund.

Long story short, XLK is up just 4.6 percent this year, telling some investors that perhaps tech is being left behind in this rally. Not really, RYT is almost 9.8 percent. The difference? Apple is RYT's second-smallest holding with an allocation of just 1.09 percent.

First Trust Health Care AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fxh#NYSE">FXH</a>)
As was noted earlier, the Health Care Select Sector SPDR has been a stellar performer this year and it is unlikely most investors would quibble about earning 11.3 percent in just over two months. For the moment, it is hard to criticize XLV beyond the fact that three stocks -– Johnson &amp; Johnson (NYSE: <a class="ticker" href="/stock/jnj#NYSE">JNJ</a>), Pfizer (NYSE: <a class="ticker" href="/stock/pfe#NYSE">PFE</a>) and Merck (NYSE: <a class="ticker" href="/stock/mrk#NYSE">MRK</a>) –- combine for about a third of the ETF's weight.

The First Trust Health Care AlphaDEX Fund takes a much different approach to this sector. Pharmaceuticals names account for just 9.4 percent of FXH's weight, but health care provides and equipment makers combine for 61 percent. Top holdings include Tenet Healthcare (NYSE: <a class="ticker" href="/stock/thc#NYSE">THC</a>), DaVita (NYSE: <a class="ticker" href="/stock/dva#NYSE">DVA</a>) and WellPoint (NYSE: <a class="ticker" href="/stock/wlp#NYSE">WLP</a>). 

Two knocks on FXH: Its expense ratio of 0.7 percent is far higher than XLV's and some other health care ETFs. Second, FXH's three-year standard deviation is about 250 basis points higher than the S&amp;P 500 Health Care Index, <a href="http://www.ftportfolios.com/retail/etf/etfsummary.aspx?Ticker=FXH">according to First Trust data. 

In favor FXH, it has a higher Sharpe ratio than the aforementioned index and has outperformed XLV this year, over the past year and over the past five years.

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

GOOG

Rydex ETF Trust Rydex S&P Equal Weight Technology ETF

3 Sector ETFs Outpacing Larger Rivals

Here is the ETF Professor's ETF Watch List for Tuesday January 8, 2013.

The PowerShares S&amp;P 500 Low Volatility ETF (NYSE: <a class="ticker" href="/stock/splv#NYSE">SPLV</a>) might be worth a look here.

Index play of the day: ProShares UltraShort QQQ (NYSE: <a class="ticker" href="/stock/qid#NYSE">QID</a>).

Commodities play of the day: ETFS Physical Palladium Shares (NYSE: <a class="ticker" href="/stock/pall#NYSE">PALL</a>).

Sector play of the day: First Trust Health Care AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fxh#NYSE">FXH</a>).

Emerging markets plays of the day: Market Vectors Brazil Small-Cap ETF (NYSE: <a class="ticker" href="/stock/brf#NYSE">BRF</a>), Guggenheim China Small Cap ETF (NYSE: <a class="ticker" href="/stock/hao#NYSE">HAO</a>) and the Direxion Daily Emerging Markets Bear 3X Shares (NYSE: <a class="ticker" href="/stock/edz#NYSE">EDZ</a>).

Forex play of the day: ProShare UltraShort Yen (NYSE: <a class="ticker" href="/stock/ycs#NYSE">YCS</a>).

Bond play of the day: PIMCO Total Return ETF (NYSE: <a class="ticker" href="/stock/bond#NYSE">BOND</a>).

Emerging Market ETFs

Currency ETFs

BOND

Direxion Daily Emerging Markets Bear 3x Shares

PALL

PowerShares S&P 500 Low Volatility Portfolio

SPLV

ETFs to Watch January 8, 2013 (BOND, PALL, QID)

When it comes to health care ETFs, there are plenty for investors to choose from. How well acquainted folks are with all of their options in this sector is another story. Sure, it is safe to say that most investors know of the Health Care Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xlv#NYSE">XLV</a>), the Vanguard Health Care ETF (NYSE: <a class="ticker" href="/stock/vht#NYSE">VHT</a>) and the iShares Nasdaq Biotechnology Index Fund (NASDAQ: <a class="ticker" href="/stock/ibb#NASDAQ">IBB</a>).

Beyond that trio and a couple of other funds, many health care ETFs toil in relative anonymity. However, in some cases, the obscurity of some unknown health care ETF belies the solid returns these funds have generated. In fact, some of the following ETFs have recently outperformed their more well-known rivals. That begs the question: Why has your broker forgotten to mention them?

First Trust Health Care AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fxh#NYSE">FXH</a>)
While the First Trust Health Care AlphaDEX Fund may not be the first health care ETF investors and the mainstream financial media think of, this fund is by no means small or thinly traded. FXH has over $629 million in assets under management and has traded an average of almost 258,500 shares per day over the last month, <a href="http://www.ftportfolios.com/retail/etf/etfsummary.aspx?Ticker=FXH">according to First Trust data</a>.

As is the case with the other AlphaDEX fund, FXH's constituents are screened on momentum and value factors such as one year sales growth and book value to price. Unlike VHT and XLV, FXH's holdings are not excessively tilted toward blue-chip pharmaceuticals names. Rather, FXH offers broader exposure to biotechnology, health care providers and equipment makers as well pharmaceuticals names. The combination seems to be working as FXH has sharply outperformed VFH and XLV over the past year.

Market Vectors Pharmaceutical ETF (NYSE: <a class="ticker" href="/stock/pph#NYSE">PPH</a>)
PPH can be viewed as the ETF that is perfect for the indecisive pharmaceuticals investor. The ETF's 26-stock lineup reads like a who's who of popular large-cap pharma stocks. Any other sub-sector exposure offered by PPH, be it biotechnology or health care equipment, comes by virtue of some of the ETF's holdings operating in those industries, not through pure plays on those themes.

Dow components Johnson &amp; Johnson (NYSE: <a class="ticker" href="/stock/jnj#NYSE">JNJ</a>) and Pfizer (NYSE: <a class="ticker" href="/stock/pfe#NYSE">PFE</a>) combine for over 19 percent of PPH's weight while other top-10 holdings include Merck (NYSE: <a class="ticker" href="/stock/mrk#NYSE">MRK</a>), Abbott Labs (NYSE: <a class="ticker" href="/stock/abt#NYSE">ABT</a>) and Teva Pharmaceuticals (NASDAQ: <a class="ticker" href="/stock/teva#NASDAQ">TEVA</a>). The rub with PPH is twofold. First, the ETF lagged FXH, VHT and XLV by wide margins in 2012. Second, the dividend yield is less than 2,7 percent, <a href="http://vaneck.com/funds/PPH.aspx">according to Market Vectors data</a>, indicating income investors could do better with individual stocks such as Johnson &amp; Johnson and Pfizer.

PowerShares Dynamic Biotechnology &amp; Genome Portfolio (NYSE: <a class="ticker" href="/stock/pbe#NYSE">PBE</a>)
The conversation about biotech ETFs usually revolves around three funds: The aforementioned IBB, the SPDR S&amp;P Biotechnology ETF (NYSE: <a class="ticker" href="/stock/xbi#NYSE">XBI</a>) and the First Trust NYSE Arca Biotech Index Fund (NYSE: <a class="ticker" href="/stock/fbt#NYSE">FBT</a>). That makes sense as that trio represents the largest biotech ETFs by assets and in 2012, XBT and FBT were among the best-performing sectors funds of any kind.

Interestingly, PBE shares something in common with FXH, that being both eschew traditional cap-weighting of their holdings. PBE's 30 holdings, which include familiar names such as Amgen (NASDAQ: <a class="ticker" href="/stock/amgn#NASDAQ">AMGN</a>) and Gilead Sciences (NASDAQ: <a class="ticker" href="/stock/gild#NASDAQ">GILD</a>), are screened on criteria including price momentum, earnings momentum, quality, management action, and value, <a href="http://www.invescopowershares.com/products/overview.aspx?ticker=PBE">according to PowerShares</a>. 

Investors should note over 45 percent of PBE's weight goes to small-cap names, implying the ETF could get a lift from new drug approvals and/or increased biotech mergers and acquisitions activity. The other side of that coin is that there are no guarantees those scenarios will materialize. 

iShares MSCI ACWI ex US Health Care Sector Index Fund (NYSE: <a class="ticker" href="/stock/axhe#NYSE">AXHE</a>)
The iShares MSCI ACWI ex US Health Care Sector Index Fund is the smallest ETF on this list with just $9.85 million in AUM, but that has not stopped the fund from gaining almost 17 percent in the past year. AXHE is true to its name in that none of its 69 holdings are based in the U.S., although plenty trade here, including Teva, Sanofi (NYSE: <a class="ticker" href="/stock/sny#NYSE">SNY</a>) and GlaxoSmithKline (NYSE: <a class="ticker" href="/stock/gsk#NYSE">GSK</a>).

Like PPH, AXHE sports a dividend yield in the 2.7 percent area, barely more than half of what GlaxoSmithKline American depositary receipts yield. AXHE is also somewhat pricey, at least based on its price-to-book ratio, which is 5.95. AXHE has a beta of 0.94 against the S&amp;P 500, <a href="http://us.ishares.com/product_info/fund/overview/AXHE.htm">according to iShares data</a>.

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

Dividends

Global

AXHE

PowerShares ETF Trust Dynamic Biotech & Genome Port

Merrill Lynch Pharmaceutical HOLDRs Trust

TEVA

4 Health Care ETFs Your Broker Forgot to Mention

First Trust, the Illinois-based ETF sponsor, is a major issuer of sector funds. As most investors know, there is no shortage of sector ETFs on the market today and this territory long dominated by the biggest fund sponsors, namely State Street's (NYSE: <a class="ticker" href="/stock/stt#NYSE">STT</a>) select sector SPDRs along with sector funds issued by iShares and Vanguard.

That is tough territory to encroach upon, but First Trust has done just that with its AlphaDEX funds that eschew the usual cap-weighting methodology in favor of using other valuation metrics to construct ETF indexes. 

The strategy has proven efficacious. Not only have an array of First AlphaDEX ETF proven proficient in terms of gaining assets under management, some have outperformed iShares, SPDR and Vanguard rivals over time.

"We're more selective in our approach," said First Trust ETF Strategist and Senior Vice President Ryan Issakainen in an interview with Benzinga from the Morningstar ETF Conference in Chicago. "We're overweighting in terms of investment merit. Over time, these attributes predict relative outperformance. We consider momentum and valuation factors that have been vetted and passed through some rigor."

The AlphaDEX methodology includes ranking members of various Russell 1000 sectors on growth factors including three, six 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, <a href="http://www.ftportfolios.com/Retail/Etf/EtfSummary.aspx?Ticker=FXN">as First Trust notes on the AlphaDEX funds' web sites</a>.

AlphaDEX has worked for some First Trust sector funds. For example, the First Trust Materials AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fxz#NYSE">FXZ</a>) has outpaced the Materials Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xlb#NYSE">XLB</a>) <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/09/2930670/etf-showdown-materials-melee">over the past year</a>, quarter and year-to-date.

Still, the AlphaDEX funds are not as large as their counterparts and in most cases are not as voluminous. The First Trust AlphaDEX Energy Fund (NYSE: <a class="ticker" href="/stock/fxn#NYSE">FXN</a>) has $134.5 million in AUM compared to $7.2 billion for the Energy Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xle#NYSE">XLE</a>). The First Trust AlphaDEX Health Care Fund (NYSE: <a class="ticker" href="/stock/fxh#NYSE">FXH</a>) has average daily volume of 138,000 shares while Health Care Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xlv#NYSE">XLV</a>) has average turnover of almost 4.8 million shares.

Issakainen notes that the AlphaDEX ETFs have been well received by investors.

"The ETFs are penetrating registered investment advisors and asset management firms," he said. "They're using AlphaDEX funds more now. The AlphaDEX sector funds have been out for more than five years and we now how they perform in different environments."

The statistics support Issakainen's view that investors are warming to the AlphaDEX methodology. FXH has $642.5 million in AUM. The First Trust Consumer Staples AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fxg#NYSE">FXG</a>) has $360.9 million in assets. The First Trust Financials AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fxo#NYSE">FXO</a>) has nearly $187 million in assets. Those are all numbers that imply the AlphaDEX sector funds are not only surviving, but thriving as well.

Due to AlphaDEX sector funds avoiding excessive weights to just one or two stocks, there are times when the funds can lag traditionally weighted ETFs. The technology sector provides a good example.

Year-to-date,the First Trust Technology AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fxl#NYSE">FXL</a>) is up 8.3 percent. FXL currently has a weight of just 1.9 percent to Apple. On the other hand, the iShares Dow Jones U.S. Technology Sector Index Fund (NYSE: <a class="ticker" href="/stock/iyw#NYSE">IYW</a>) is up nearly 19 percent this year. That fund features the largest allocation of any ETF to Apple with a current weight of 24.2 percent.

"There will be times when AlphaDEX funds trail, particularly during risk averse environments," said Issakainen. "If we're underweight big, safe stocks, we can underperform, but that is not the case the majority of the time."

He is right about that. Over the past five years, a brutal time for bank stocks, FXO is off 16.3 percent compared to a 53 percent plunge for the Financial Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xlf#NYSE">XLF</a>). Since May 2007, the debut month of FXH, that ETF has surged over 70 percent, but XLV is up just 14 percent. In the past year, FXN has delivered almost 400 basis points in additional alpha compared to XLE and has topped the Vanguard Energy ETF (NYSE: <a class="ticker" href="/stock/vde#NYSE">VDE</a>) by more than 500 basis points.

For more on AlphaDEX ETFs, click <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/09/2930670/etf-showdown-materials-melee">here</a>.

iShares Dow Jones US Technology Sector Index Fund

AlphaDEX ETFs Do Things Differently With Stellar Results

iShares Dow Jones US Health Care Provides Index Fund

iShares Dow Jones US Medical Devices Index Fund

iShares Trust S&P Global Healthcare Sector Index Fund

Top 10 Healthcare ETFs

Some sectors have a reputation for being home to value stocks, but that does not mean that those sectors are always a good value. With the risk on trade being emphatically turned off over the past three months, investors have predictably scurried away from high-beta sectors such as energy and materials to boring hideouts such as telecommunications and utilities.

The subsequent runs, higher by several popular conservative sector ETFs, has these funds looking a little frothy. As has been noted before, there are plenty of sector funds with elevated price/earnings ratio <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/05/2594582/4-high-pe-etfs-ibb-igv-pnqi">that would not surprise many investors</a>. 

Now, there are some sector ETFs with valuation surprises in store. Buyer beware.

Utilities Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xlu#NYSE">XLU</a>)
Over the past 90 days, the Utilities Select Sector SPDR is up 6.2 percent while the SPDR S&amp;P 500 (NYSE: <a class="ticker" href="/stock/spy#NYSE">SPY</a>) is off 4.4 %. Said differently, investors have flocked to utilities, a sector prized for its <a href="http://www.benzinga.com/analyst-ratings/analyst-color/12/06/2673160/goldman-highlights-etf-correlations-xlf-xlk-xlu">low correlations to high-beta sectors and the broader market</a>.

XLU's current P/E ratio of almost 15.4 is towards the higher end of the historical average for high-quality utilities stocks, but the P/E ratio isn't the problem. At the end of May, XLU was sporting a price/earnings to growth ratio that was well in excess of <a href="http://etfdb.com/2012/which-sector-etfs-are-cheap/">SPY and the SPDRs funds tracking the financial services and technology sectors</a>, just to name a pair.

XLU, with its yield of just under four percent, is sitting just pennies below its 52-week high, but some have grown skeptical of this bull run with one noted technical analyst issuing the bold proclamation that XLU <a href="http://peaktheories.com/self.php?id=1503">could possibly fall to $20</a>.

iShares Dow Jones U.S. Telecommunications Sector Index Fund (NYSE: <a class="ticker" href="/stock/iyz#NYSE">IYZ</a>)
The iShares Dow Jones U.S. Telecommunications Sector Index Fund has been another prime beneficiary of the flight to boring sectors. In the past month, IYZ is up 6.1 %, a performance that is understandable when noting IYZ has a beta of just 0.66, according to iShares data. 

IYZ does have a strong chart and it can be argued the fund does have more upside in store as it rests 11.2 % below its 52-week high. The cautionary tale comes in the form of a <a href="http://us.ishares.com/product_info/fund/overview/IYZ.htm?fundSearch=true&amp;qt=IYZ">P/E ratio over 40</a>. That is more than double the P/E ratio on the iShares Dow Jones U.S. Technology Sector Index Fund (NYSE: <a class="ticker" href="/stock/iyw#NYSE">IYW</a>), an ETF that allocates almost 23 % of its weight to Apple (Nasdaq: <a class="ticker" href="/stock/aapl#Nasdaq">AAPL</a>).

Consumer Staples Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xlp#NYSE">XLP</a>)
Investors continue to put cash to work with staples stocks and ETFs. That much is highlighted by the fact that for the week ending June 14, XLP saw inflows of $378 million, <a href="http://www.forbes.com/sites/etfchannel/2012/06/14/consumer-staples-select-sector-spdr-fund-experiences-big-inflow-3/?partner=yahootix">according to ETF Channel data</a>.

With a current P/E ratio of just over 16, XLP is trading at the higher end of its <a href="http://www.bespokeinvest.com/thinkbig/2012/4/20/sector-pe-ratios.html">trailing 12-month range</a>, indicating this sector that is often viewed as the epitome of a value play may have little value left to offer.

First Trust Health Care AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fxh#NYSE">FXH</a>)
A recent note by Goldman Sachs on the topic of <a href="http://www.benzinga.com/analyst-ratings/analyst-color/12/06/2673160/goldman-highlights-etf-correlations-xlf-xlk-xlu">sector correlations</a> indicates that some investors may be caught off guard by the rising correlations shown by the Health Care Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xlv#NYSE">XLV</a>).

"While 32 of the examined 36 sector pairs showed decreases in correlations, all of the four that showed increases included Healthcare. As an example, correlations between Healthcare and Financials rose to 76% from 73%, versus an average decrease in correlations of 8% among all 36 pairs," Goldman said in the note.

This is relevant to the First Trust Health Care AlphaDEX Fund as well. FXH, a $543.8 million ETF that has earned five-star ratings from Morningstar based on its three- and five-year performances, is a credible alternative to the larger XLV. Year-to-date, FXH has outperformed XLV by more than 400 basis points. That added alpha comes at a slight premium though as FXH now sports a P/E ratio of 13.8 compared to less than 12.5 for XLV. In defense of FXH, the ETF's price/book ratio is lower than XLV's. 

For more on ETFs with elevated P/E ratios, click <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/05/2594582/4-high-pe-etfs-ibb-igv-pnqi">HERE</a>.

iShares Dow Jones US Telecommunications Sector Index Fund

Sneaky High: Some Sector ETFs Now Surprisingly Pricey

April showers didn't give way to many May flowers for U.S. stocks and ETFs. After Friday's action, it's safe to say traders and investor might be in for some June gloom as well. Quips about the months aside, the path of least resistance for riskier assets is down, at least for the foreseeable future. 

These are trying times indeed, but contrarian investing has often proven rewarding over time <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/05/2600146/contrarian-etf-bets-to-consider-fcg-iyw">and there are plenty of worthy ETFs with which to establish contrarian positions right now</a>.

S&amp;P Capital IQ runs a contrarian ETF portfolio that holds eight ETFs. The portfolio was up 11.2% through the end of April and has outperformed its benchmark index by 150 points since its October 2009 inception. Earlier this week, the research firm made some new additions to the portfolio that certainly fit the bill as contrarian given the current market environment.

Despite the substantial declines experienced by almost every emerging markets ETF under the sun over the past several weeks, S&amp;P Capital IQ added the Vanguard MSCI Emerging Markets ETF (NYSE: <a class="ticker" href="/stock/vwo#NYSE">VWO</a>) to its contrarian portfolio. VWO, which had almost $54 billion in assets under management at the end of April, is the largest emerging markets ETF on the market today. 

S&amp;P rates VWO Marketweigtht. The fund, which has lost more than 13% in the past month, is heavily allocated to Chinese, South Korean, Brazilian and Taiwanese equities, among others. 

The Vanguard Mid-Cap Growth ETF (NYSE: <a class="ticker" href="/stock/vot#NYSE">VOT</a>) was also added to the portfolio. VOT, which is also rated Marketweight by S&amp;P, has an expense ratio of just 0.1%, making it cheaper than 93% of comparable funds, according to Vanguard. Consumer discretionary and technology names account for 42.5% of VOT's weight while health care and industrials combine for another 29.3%. The fund has lost 11.3% in the past month.

Perhaps the most contrarian addition of the three is the iShares Dow Jones US Oil Equipment Index Fund (NYSE: <a class="ticker" href="/stock/iez#NYSE">IEZ</a>), which S&amp;P also rates Marketweight. Since the start of May, West Texas Intermediate crude has lost about 20%, including a 17% drop last month. Over the same time, the iShares Dow Jones US Oil Equipment Index Fund has slipped almost 16%. 

"A look under the hood of IEZ reveals that the ETF ranks favorably in the performance-ranking category, but receives a neutral assessment of its cost factors. In the risk considerations category, S&amp;P Capital IQ determined the ETF ranks unfavorably" S&amp;P said in a research note. "IEZ tracks the performance of the Dow Jones US Select Oil Equipment &amp; Services Index, which is focused on oil industries. While the ETF's ranking is hurt by its elevated volatility, analyst Todd Rosenbluth pointed to the potentially favorable characteristics of the underlying holdings. Five-STARS-ranked Schlumberger (NYSE: <a class="ticker" href="/stock/slb#NYSE">SLB</a>) is the ETF's top holding and six other stocks within the top-10 holdings are considered attractive by S&amp;P Capital IQ equity analysts."

Schlumberger, the world's largest oilfield services provider, currently accounts for nearly 20.5% of IEZ's weight. Other top-10 holdings include National Oilwell Varco (NYSE: <a class="ticker" href="/stock/nov#NYSE">NOV</a>), Halliburton (NYSE HAL) and Baker Hughes (NYSE: <a class="ticker" href="/stock/bhi#NYSE">BHI</a>).

Other members of the S&amp;P contrarian portfolio include the iShares Dow Jones International Select Dividend Index Fund (NYSE: <a class="ticker" href="/stock/idv#NYSE">IDV</a>), the First Trust Health Care AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fxh#NYSE">FXH</a>) and the PowerShares S&amp;P 500 High Quality ETF (NYSE: SPHQ).

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iShares Dow Jones International Select Dividend Income Fund

iShares Dow Jones US Oil Equipment & Services Index Fund

S&P Capital IQ Highlights 3 Contrarian ETFs (IEZ, VWO, VOT)

There are plenty of instances in life when bigger is better. When it comes to exchange-traded products, <a href="http://www.benzinga.com/trading-ideas/long-ideas/11/11/2108027/bigger-isnt-always-better-with-etfs-part-ii">bigger isn't always associated with better</a>. At least when it comes to what should be investors' primary consideration: Returns.

It has been documented that ETFs and ETNs with <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/02/2356406/five-thinly-traded-etfs-to-consider-ald-scin-bno">low average daily volume</a> and an assets under management number that may not be viewed as impressive by the so-called experts can outperform. In fact, all investing in an ETF with a bigger AUM total does is lead investors to a bigger fund, <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/04/2465525/etf-opinion-the-100m-watermark-is-asinine">not larger returns</a>.

Fortunately, a move away AUM and average daily volume as the primary determinants of an ETF's worth is already under way. 

"Some of the traders we talk to are using AUM and ADV a lot less now," said Chris Hempstead, head of institutional sales and trading at WallachBeth Capital. "Some hedge funds using ETFs to hedge might use the larger ETFs because they just need short-term exposure, but buy-side traders are using AUM and ADV less and less."

The statistics back up the assertion that bigger isn't always better with ETFs. In an interview with Benzinga, Hempstead noted that in the case of the nine Select Sector SPDRs, all have been outperformed by a comparable fund of smaller stature on a year-to-date basis. 

Here are just a few examples. The $5.2 billion Consumer Staples Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xlp#NYSE">XLP</a>) trailed the iShares Dow Jones US Consumer Goods Index Fund (NYSE: <a class="ticker" href="/stock/iyk#NYSE">IYK</a>) by more than 200 basis points as of the close of markets on April 20. 

The Energy Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xle#NYSE">XLE</a>), home to almost $7.5 billion in AUM, is negative on the year while the PowerShares Dynamic Energy Sector Portfolio (NYSE: <a class="ticker" href="/stock/pxi#NYSE">PXI</a>) and its $143.1 million in AUM have generated positive returns. 

No one would deny the Health Care Select Sector SPDR (XLV), which is home to over $4 billion in AUM, is having a nice year, but the First Trust Health Care AlphaDEX (NYSE: <a class="ticker" href="/stock/fxh#NYSE">FXH</a>) with "just" $597 million in AUM has offered better than double the returns of XLV.

"I would argue that the excess return achieved in using the ‘less liquid' names far outweighs the often times falsely reported ‘excess cost' to trade these names. If a name is thinly traded, it is important to remember that the ADV is the least important number if total return is what you are looking to maximize," Hempstead said.

The problem with money managers overlooking smaller, less liquid ETFs is the result is a viscous circle. According to WallachBeth data, there's $1.19 trillion in AUM at U.S. ETFs and ETNs, but the 75 largest funds hold $883.5 billion, or 74% of the overall total.

When looking at average daily volume, the top 75 funds by that metric make 53% of total ETF/ETN assets. The top-10 most heavily traded ETFs alone account for 25% of total exchange-traded products AUM, according to WallachBeth.

The vicious circle comes about by managers continuing to trade and pour money only into the biggest, most liquid names simply because those are the biggest, most liquid funds. That may give those managers some level of false comfort, but their clients would undoubtedly feel quite uncomfortable knowing their returns are being compromised.

In the case of XLP, there are six other staples funds, including IYK, that have delivered better returns this year. Including PXI, four other equity-based energy ETFs have done better than XLE. Six health care funds have outpaced XLV while five other industrials ETFs have delivered better year-to-date returns than the Industrial Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xli#NYSE">XLI</a>), according to WallachBeth data.

"Look, we expect that fund managers looking for quick (possibly even short term) and general exposure to a sector are going to first go to the most liquid product," Hempstead said. "That's okay. What we are encouraging is that if you have some time to do some research, ask some questions, look under the hood and consider all of your options and the costs therein you may find yourself with a smug grin of satisfaction knowing your money is exactly where you want it, all because you did a little bit of digging."

For more on the bigger isn't always better debate, please click <a href="http://www.benzinga.com/trading-ideas/long-ideas/11/12/2198258/bigger-isnt-always-better-with-etfs-part-iv">HERE</a>.

iShares Trust Dow Jones USnsumer Goods Sector Index Fund

PowerShares Dynamic Energy Sector Portfolio

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First Trust Health Care AlphaDEX

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First Trust Health Care AlphaDEX (ARCA:FXH), Quote.Headers.trade-ideas