Launched on 05/08/2007, the First Trust Large Cap Value AlphaDEX ETF (FTA) is a passively managed exchange traded fund designed to provide a broad exposure to the Large Cap Value segment of the US equity market.
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.21 billion, making it one of the average sized ETFs attempting to match the Large Cap Value segment of the US equity market.
Why Large Cap Value
Companies that find themselves in the large cap category typically have a market capitalization above $10 billion. Overall, they are usually a stable option, with less risk and more sure-fire cash flows than mid and small cap companies.
Value stocks have lower than average price-to-earnings and price-to-book ratios. They also have lower than average sales and earnings growth rates. Looking at their long-term performance, value stocks have outperformed growth stocks in almost all markets. They are however likely to underperform growth stocks in strong bull markets.
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 0.60%, making it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 2.01%.
Sector Exposure and Top Holdings
ETFs offer a 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.
This ETF has heaviest allocation to the Financials sector--about 21.60% of the portfolio. Energy and Utilities round out the top three.
Looking at individual holdings, Hewlett Packard Enterprise Company (HPE) accounts for about 1.11% of total assets, followed by Arch Capital Group Ltd. (ACGL) and Cheniere Energy, Inc. (LNG).
The top 10 holdings account for about 9.91% of total assets under management.
Performance and Risk
FTA seeks to match the performance of the Nasdaq AlphaDEX Large Cap Value Index before fees and expenses. The NASDAQ AlphaDEX Large Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Value Index.
The ETF has added about 9.20% so far this year and is up about 11.68% in the last one year (as of 08/02/2024). In the past 52-week period, it has traded between $61.60 and $77.75.
The ETF has a beta of 1.08 and standard deviation of 16.85% for the trailing three-year period, making it a medium risk choice in the space. With about 188 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Large Cap Value AlphaDEX ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FTA is an outstanding option for investors seeking exposure to the Style Box - Large Cap Value segment of the market. There are other additional ETFs in the space that investors could consider as well.
The Schwab U.S. Dividend Equity ETF (SCHD) and the Vanguard Value ETF (VTV) track a similar index. While Schwab U.S. Dividend Equity ETF has $58 billion in assets, Vanguard Value ETF has $119.85 billion. SCHD has an expense ratio of 0.06% and VTV charges 0.04%.
Bottom-Line
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
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 Large Cap Value AlphaDEX ETF (FTA): ETF Research Reports
Cheniere Energy, Inc. (LNG) : Free Stock Analysis Report
Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
Hewlett Packard Enterprise Company (HPE) : Free Stock Analysis Report
Vanguard Value ETF (VTV): ETF Research Reports
Schwab U.S. Dividend Equity ETF (SCHD): 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.
