Designed to provide broad exposure to the Style Box - Large Cap Blend category of the market, the First Trust Capital Strength ETF (FTCS) is a smart beta exchange traded fund launched on 07/06/2006.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
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.
Fund Sponsor & Index
Managed by First Trust Advisors, FTCS has amassed assets over $8.82 billion, making it one of the largest ETFs in the Style Box - Large Cap Blend. Before fees and expenses, FTCS seeks to match the performance of the The Capital Strength Index.
The Capital Strength Index is an equal-dollar weighted index which provides exposure to well-capitalized companies with strong market positions based on strong balance sheets, high degree of liquidity, ability to generate earnings growth & record financial strength & profit growth.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Operating expenses on an annual basis are 0.54% for this ETF, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 1.30%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
For FTCS, it has heaviest allocation in the Financials sector --about 24.50% of the portfolio --while Industrials and Consumer Staples round out the top three.
When you look at individual holdings, Walmart Inc. (WMT) accounts for about 2.34% of the fund's total assets, followed by Visa Inc. (class A) (V) and Cisco Systems, Inc. (CSCO).
FTCS's top 10 holdings account for about 21.92% of its total assets under management.
Performance and Risk
So far this year, FTCS has added roughly 2.22%, and is up about 11.43% in the last one year (as of 02/05/2025). During this past 52-week period, the fund has traded between $81.48 and $94.03.
The ETF has a beta of 0.86 and standard deviation of 13.35% for the trailing three-year period, making it a medium risk choice in the space. With about 51 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Capital Strength 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.
Vanguard S&P 500 ETF (VOO) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY) tracks S&P 500 Index. Vanguard S&P 500 ETF has $600.42 billion in assets, SPDR S&P 500 ETF has $627.23 billion. VOO 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.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.
Get it free >>First Trust Capital Strength ETF (FTCS): ETF Research Reports
Visa Inc. (V) : Free Stock Analysis Report
Walmart Inc. (WMT) : Free Stock Analysis Report
Cisco Systems, Inc. (CSCO) : Free Stock Analysis Report
SPDR S&P 500 ETF (SPY): ETF Research Reports
Vanguard S&P 500 ETF (VOO): ETF Research Reports
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
