Market Overview

Popular ETF Of ETFs Gets Defensive After Market Slide

Popular ETF Of ETFs Gets Defensive After Market Slide

The First Trust Dorsey Wright Focus 5 ETF (First Trust Exchange Traded Fund VI (NASDAQ: FV)) is reportedly dumping some of its riskier holdings in favor of more conservative fare as the S&P 500 has tumbled 8 percent year to date.


Since coming to market in March 2014, FV has held the same five First Trust industry and sector ETFs. Those funds are as follows:

  • First Trust NYSE Arca Biotchnlgy Indx Fd (NYSE: FBT)
  • First Trust DJ Internet Index Fund (ETF) (NYSE: FDN)
  • First Trust Cnsumer Stapl Alpha Fd (ETF) (NYSE: FXG)
  • First Trust Health Care AlphaDEX Fd(ETF) (NYSE: FXH)
  • First Trust Cnsmer Disry Alpha Fnd (ETF) (NYSE: FXD)

Related Link: An ETF That's A Good Value For Value Stocks

That was FV's lineup as of February 4, according to First Trust data.

An Appreciated Switch

Citing market evidence and ETF market makers, Barron's reported FV made its first change last week, swapping out of FBT for the First Trust Utilities AlphaDEX Fnd (ETF) (NYSE: FXU). 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's report about FV dumping FBT in favor of FXU is accurate. For example, FBT's volume swelled 17.1 million shares on Friday compared to the ETF's 90-day average of just over 531,300. FXU'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.

The Bottom Line

FV, an ETF beloved by advisors and investors that are followers of Dorsey Wright'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.

Image Credit: Public Domain


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