Launched on 05/08/2007, the First Trust Materials AlphaDEX ETF (FXZ) is a passively managed exchange traded fund designed to provide a broad exposure to the Materials - Broad segment of the equity market.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Materials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 15, placing it in bottom 6%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $335.44 million, making it one of the average sized ETFs attempting to match the performance of the Materials - Broad segment of the equity market. FXZ seeks to match the performance of the StrataQuant Materials Index before fees and expenses.

The StrataQuant Materials Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.

Costs

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 counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.62%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.62%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Materials sector--about 88.70% of the portfolio. Industrials and Consumer Discretionary round out the top three.

Looking at individual holdings, United States Steel Corporation (X) accounts for about 5.36% of total assets, followed by Fmc Corporation (FMC) and Reliance Inc. (RS).

The top 10 holdings account for about 45.74% of total assets under management.

Performance and Risk

The ETF has lost about -6.77% so far this year and is up roughly 0.83% in the last one year (as of 09/17/2024). In that past 52-week period, it has traded between $58.78 and $72.04.

The ETF has a beta of 1.19 and standard deviation of 24.31% for the trailing three-year period, making it a medium risk choice in the space. With about 38 holdings, it has more concentrated exposure than peers.