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Should You Invest in the First Trust Consumer Staples AlphaDEX ETF (FXG)?

Zacks Equity Research
·3 min read

If you're interested in broad exposure to the Consumer Staples - Broad segment of the equity market, look no further than the First Trust Consumer Staples AlphaDEX ETF (FXG), a passively managed exchange traded fund launched on 05/08/2007.

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.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Consumer Staples - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 8, placing it in top 50%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $420.22 million, making it one of the average sized ETFs attempting to match the performance of the Consumer Staples - Broad segment of the equity market. FXG seeks to match the performance of the StrataQuant Consumer Staples Index before fees and expenses.

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The StrataQuant Consumer Staples 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

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.63%, making it the most expensive product in the space.

It has a 12-month trailing dividend yield of 0.94%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Consumer Staples sector--about 86.40% of the portfolio. Healthcare and Materials round out the top three.

Looking at individual holdings, Freshpet, Inc. (FRPT) accounts for about 4.97% of total assets, followed by Performance Food Group Company (PFGC) and Ingredion Incorporated (INGR).

The top 10 holdings account for about 39.76% of total assets under management.

Performance and Risk

The ETF has added about 3.42% so far this year and it's up approximately 6.61% in the last one year (as of 06/27/2024). In that past 52-week period, it has traded between $57.04 and $68.49.

The ETF has a beta of 0.65 and standard deviation of 13.61% for the trailing three-year period, making it a medium risk choice in the space. With about 41 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust Consumer Staples AlphaDEX ETF sports a Zacks ETF Rank of 4 (Sell), which is based on expected asset class return, expense ratio, and momentum, among other factors. FXG, then, is not a suitable option for investors seeking exposure to the Consumer Staples ETFs segment of the market. Instead, there are better ETFs in the space to consider.

Vanguard Consumer Staples ETF (VDC) tracks MSCI US Investable Market Consumer Staples 25/50 Index and the Consumer Staples Select Sector SPDR ETF (XLP) tracks Consumer Staples Select Sector Index. Vanguard Consumer Staples ETF has $6.67 billion in assets, Consumer Staples Select Sector SPDR ETF has $15.70 billion. VDC has an expense ratio of 0.10% and XLP charges 0.09%.

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 the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

First Trust Consumer Staples AlphaDEX ETF (FXG): ETF Research Reports

Freshpet, Inc. (FRPT) : Free Stock Analysis Report

Ingredion Incorporated (INGR) : Free Stock Analysis Report

Consumer Staples Select Sector SPDR ETF (XLP): ETF Research Reports

Performance Food Group Company (PFGC) : Free Stock Analysis Report

Vanguard Consumer Staples ETF (VDC): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research