Is First Trust Energy AlphaDEX ETF (FXN) a Strong ETF Right Now?

A smart beta exchange traded fund, the First Trust Energy AlphaDEX ETF (FXN) debuted on 05/08/2007, and offers broad exposure to the Energy ETFs category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

Managed by First Trust Advisors, FXN has amassed assets over $390.33 million, making it one of the average sized ETFs in the Energy ETFs. This particular fund seeks to match the performance of the StrataQuant Energy Index before fees and expenses.

The StrataQuant Energy 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.

Cost & Other Expenses

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.63%.

The fund has a 12-month trailing dividend yield of 1.58%.

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 in the Energy sector - about 95.1% of the portfolio.

Looking at individual holdings, Hf Sinclair Corp. (DINO) accounts for about 5.18% of total assets, followed by Apa Corporation (APA) and Devon Energy Corporation (DVN).

FXN's top 10 holdings account for about 43.28% of its total assets under management.

Performance and Risk

The ETF return is roughly 39.01% so far this year and is up about 52.53% in the last one year (as of 08/12/2026). In the past 52-week period, it has traded between $15.32 and $23.18

FXN has a beta of 0.54 and standard deviation of 25.23% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 40 holdings, it has more concentrated exposure than peers .

Alternatives

First Trust Energy AlphaDEX ETF is a reasonable option for investors seeking to outperform the Energy ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

Vanguard Energy Index Fund ETF Shares (VDE) tracks MSCI US Investable Market Energy 25/50 Index and the State Street Energy Select Sector SPDR ETF (XLE) tracks Energy Select Sector Index. Vanguard Energy Index Fund ETF Shares has $10.41 billion in assets, State Street Energy Select Sector SPDR ETF has $39.8 billion. VDE has an expense ratio of 0.09% and XLE changes 0.08%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Energy ETFs

Bottom Line

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This article originally published on Zacks Investment Research (zacks.com).

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