Should You Invest in the First Trust Health Care AlphaDEX ETF (FXH)? – July 14, 2023
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If you’re interested in broad exposure to the Healthcare – Broad segment of the equity market, look no further than the First Trust Health Care AlphaDEX ETF (FXH – Free Report) , a passively managed exchange traded fund launched on 05/08/2007.
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.
Investor-friendly, sector ETFs provide many options to gain low risk and diversify exposure to a broad group of companies in particular sectors. Healthcare – Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 7th, placing it in the top 44%.
Index Details
The fund is sponsored by First Trust Advisors. It has secured assets of over $1.56 billion, making it one of the larger ETFs trying to match the performance of the Healthcare – Broad segment of the equity market. FXH seeks to match the performance of the StrataQuant Health Care Index before fees and expenses.
The StrataQuant Health Care Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
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 0.61%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.28%.
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 the heaviest allocation in the Healthcare sector–about 100% of the portfolio.
Looking at individual holdings, Catalent, Inc. (CTLT – Free Report) accounts for about 2.33% of total assets, followed by Hca Healthcare, Inc. (HCA – Free Report) and Insulet Corporation (PODD – Free Report) .
The top 10 holdings account for about 21.60% of total assets under management.
Performance and Risk
Year-to-date, the First Trust Health Care AlphaDEX ETF has lost about -0.55% so far, and is up about 3.89% over the last 12 months (as of 07/14/2023). FXH has traded between $96.46 and $114.21 in this past 52-week period.
The ETF has a beta of 0.80 and a standard deviation of 17.97% for the trailing three-year period, making it a medium risk choice in the space. With about 84 holdings, it effectively diversifies company-specific risks.
Alternatives
First Trust Health Care AlphaDEX ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FXH is a reasonable option for those seeking exposure to the Health Care ETFs area of the market. Investors might also want to consider some other ETF options in the space.
Vanguard Health Care ETF (VHT – Free Report) tracks the MSCI US Investable Market Health Care 25/50 Index and the Health Care Select Sector SPDR ETF (XLV – Free Report) tracks Health Care Select Sector Index. Vanguard Health Care ETF has $16.60 billion in assets, Health Care Select Sector SPDR ETF has $40.05 billion. VHT has an expense ratio of 0.10% and XLV charges 0.10%.
bottom line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on the latest developments in the ETF investing universe, please visit the Zacks ETF Center.
