Designed to provide broad exposure to the Large Cap Value segment of the US equity market, the First Trust Large Cap Value AlphaDEX ETF (FTA) is a passively managed exchange traded fund launched on 05/08/2007.
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.15 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. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.
While 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. Considering long-term performance, value stocks have outperformed growth stocks in almost all markets; however, they are more likely to underperform growth stocks in strong bull markets.
Costs
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for this ETF are 0.59%, making it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 1.82%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Financials sector--about 23.30% of the portfolio. Utilities and Industrials round out the top three.
Looking at individual holdings, At&t Inc. (T) accounts for about 1.16% of total assets, followed by Lkq Corporation (LKQ) and Exxon Mobil Corporation (XOM).
The top 10 holdings account for about 10.03% 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 lost about -6.91% so far this year and is down about -0.98% in the last one year (as of 09/08/2022). In the past 52-week period, it has traded between $61.01 and $72.65.
The ETF has a beta of 1.10 and standard deviation of 28.62% 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.