Looking for broad exposure to the Healthcare – Broad segment of the equity market? You should consider the First Trust Health Care AlphaDEX ETF (FXH), a passively managed exchange traded fund launched on 05/08/2007.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Healthcare – Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 2, placing it in top 13%.
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.20 billion, making it one of the larger ETFs attempting 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.
When considering an ETF’s total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
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 0.25%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund’s holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Healthcare sector–about 100% of the portfolio.
Looking at individual holdings, Medpace Holdings, Inc. (MEDP) accounts for about 2.28% of total assets, followed by Viatris Inc. (VTRS) and Encompass Health Corporation (EHC).
The top 10 holdings account for about 20.42% of total assets under management.
Performance and Risk
The ETF has lost about -13.36% and is down about -11% so far this year and in the past one year (as of 11/15/2023), respectively. FXH has traded between $90.04 and $114.21 during this last 52-week period.
The ETF has a beta of 0.78 and standard deviation of 16.98% for the trailing three-year period, making it a medium risk choice in the space. With about 86 holdings, it effectively diversifies company-specific risk.
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 sufficient 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) tracks MSCI US Investable Market Health Care 25/50 Index and the Health Care Select Sector SPDR ETF (XLV) tracks Health Care Select Sector Index. Vanguard Health Care ETF has $15.75 billion in assets, Health Care Select Sector SPDR ETF has $36.34 billion. VHT has an expense ratio of 0.10% and XLV charges 0.10%.
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.
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