First Trust Materials AlphaDEX® Fund (FXZ)

Overview

The First Trust Materials AlphaDEXu00ae Fund (FXM) is an actively managed exchange-traded fund that seeks to provide capital appreciation by investing in a diversified portfolio of U.S. listed equity securities of companies within the materials sector. The fund employs a proprietary AlphaDEXu00ae methodology that ranks stocks based on various fundamental criteria, aiming to identify those with strong growth and value characteristics. Its asset allocation is primarily focused on stocks within the basic materials, chemicals, metals and mining, and paper and forest products industries.

Reputation and Reliability

First Trust is a well-established and reputable issuer of ETFs known for its diverse range of actively managed and index-tracking products. They have a significant presence in the ETF market and a long track record of managing investment funds.

Management Expertise

The fund is managed by First Trust Advisors L.P., an investment advisory firm with extensive experience in portfolio management. Their team utilizes the proprietary AlphaDEXu00ae selection methodology, which is designed to identify and overweight stocks with strong growth and value potential.

Goal

The primary investment goal of the First Trust Materials AlphaDEXu00ae Fund is to achieve capital appreciation.

Investment Approach and Strategy

Strategy: The ETF does not track a specific index. Instead, it utilizes a proprietary quantitative methodology (AlphaDEXu00ae) to select and weight individual securities within the materials sector. This approach aims to outperform passive benchmarks by identifying companies with superior fundamental characteristics.

Composition The ETF primarily holds common stocks of companies engaged in the materials sector. The selection process considers factors such as sales growth, earnings growth, return on equity, and price-to-book ratios to identify potential investments.

Market Share: While specific real-time market share data for individual ETFs can fluctuate and is proprietary, FXM is a significant player within the US materials sector ETF space, though it faces competition from larger, passively managed sector funds.

Total Net Assets (AUM): 1374000000

Key Competitors

• Vanguard Materials ETF (VAW)
• iShares U.S. Basic Materials ETF (IYM)
• SPDR S&P Metals & Mining ETF (XME)

Competitive Landscape

The US materials sector ETF landscape is competitive, dominated by large, passively managed index funds offering broad exposure. FXM's advantage lies in its active management and proprietary AlphaDEXu00ae methodology, which aims to identify outperforming stocks. However, its actively managed nature can lead to higher expense ratios compared to passive ETFs. Competitors like VAW and IYM offer broader, market-cap-weighted exposure to the materials sector, while XME focuses on metals and mining. FXM's niche is its quantitative selection process within the sector.

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Benchmark Comparison: The First Trust Materials AlphaDEXu00ae Fund's performance is typically compared against broad materials sector indices. While specific benchmark data is not provided, the AlphaDEXu00ae methodology aims to outperform its peers and benchmarks by strategically selecting stocks with strong growth and value characteristics.

Expense Ratio: 0.0063

Average Trading Volume

The ETF exhibits moderate average daily trading volume, suggesting reasonable liquidity for most investors.

Bid-Ask Spread

The bid-ask spread for FXM is generally tight, indicating efficient trading and minimal cost for most market participants.

Market Environment Factors

The performance of FXM is influenced by global economic growth, industrial production levels, commodity prices (such as metals and energy), and demand for manufactured goods. Factors like infrastructure spending, technological advancements in materials science, and geopolitical events can also impact the sector.

Growth Trajectory

FXM's growth trajectory is tied to the broader materials sector's performance and the effectiveness of its AlphaDEXu00ae selection methodology. The fund may adjust its holdings based on the quantitative ranking of companies within the sector, reflecting changes in market conditions and company fundamentals.

Competitive Edge

The primary competitive advantage of FXM lies in its proprietary AlphaDEXu00ae investment methodology. This quantitative approach, focused on identifying stocks with strong growth and value characteristics within the materials sector, allows it to actively manage its portfolio and potentially outperform passive benchmarks. This active selection process offers a distinct strategy compared to broad-market materials ETFs. The fund's focus on a specific, essential sector also provides a clear investment thesis.

Volatility

FXM has exhibited moderate historical volatility, which is typical for sector-specific ETFs. Its performance can be influenced by the cyclical nature of the materials industry.

Market Risk

The specific risks associated with FXM's underlying assets include fluctuations in commodity prices, the cyclicality of industrial demand, company-specific operational risks, and potential regulatory changes impacting the materials sector.

Ideal Investor Profile

The ideal investor for FXM is one seeking exposure to the materials sector with an active management approach aiming for capital appreciation. Investors should have a moderate risk tolerance and understand the cyclical nature of the materials industry. It is suitable for those who believe in the long-term growth prospects of the materials sector and the potential of a quantitative selection strategy.

Market Risk

FXM is best suited for long-term investors who are looking for growth within the materials sector and are comfortable with the nuances of active management. It can also be considered by investors looking to diversify their portfolios with a focused exposure to industrial inputs.

The First Trust Materials AlphaDEXu00ae Fund (FXM) is an actively managed ETF focused on the US materials sector, utilizing a proprietary AlphaDEXu00ae methodology to select stocks with strong growth and value characteristics. It aims for capital appreciation by outperforming passive benchmarks through its quantitative approach. While it faces competition from larger passive ETFs, its active strategy and focus on fundamental criteria offer a distinct investment choice. Investors seeking targeted exposure to materials with active management and a moderate risk tolerance would find FXM suitable.

Data Sources:

• First Trust website
• Financial data aggregators (e.g., Yahoo Finance, Morningstar)

Disclaimers:

This information is for informational purposes only and should not be considered investment advice. Past performance is not indicative of future results. Investors should conduct their own due diligence and consult with a financial advisor before making investment decisions.