Neither process nor people stand out at First Trust Dow Jones Internet ETF, but it gets just enough right to help this strategy retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy gets an Average Process Pillar. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in quality exposure and an overweight in liquidity exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And a high liquidity exposure is rooted in stocks with higher trading volumes, lending managers more flexibility. The equity team managing the passive strategy earns the strategy an Average People Pillar rating. The strategy's parent organization doesn't stand out, earning the firm an Average Parent Pillar rating. It has displayed a handful of investor-friendly attributes including overall low fees but is held back by low portfolio manager retention.

Analyst Rating

Amazon

Alphabet

Cisco Systems

salesforce.com

Netflix

PayPal

Airbnb

Snowflake

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. First Trust Dow Jones Internet Fund earns an Average Process Pillar rating. The leading factor in the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The process is limited by the fund's unremarkable long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period.

The investment strategy as stated in the fund's prospectus is:  The investment seeks investment results that correspond generally to the price and yield (before the fund's fees and expenses) of an equity index called the Dow Jones Internet Composite Index SM (the "index").  The fund will normally invest at least 90% of its net assets (including investment borrowings) in the securities that comprise the index. The index is designed to measure the performance of the largest and most actively traded securities issued by U.S. companies in the Internet industry. The index is a composite of its two sub-indices and the Dow Jones Internet Commerce Index and the Dow Jones Internet Services Index. It is non-diversified. 

 The portfolio is overweight in communication services and consumer cyclical relative to the category average by 22.8 and 12.4 percentage points, respectively. The sectors with low exposure compared to category peers are technology and industrials, underweight the average by 35.4 and 2.8 percentage points of assets, respectively. The strategy owns 43 securities and is relatively top-heavy. Of the strategy's assets, 51.0% are concentrated within the top 10 holdings, as opposed to the category’s 48.5% average. And in closing, in terms of portfolio turnover, this fund trades less regularly than the typical peer in its category, which may result in a lower cost to investors.

Average

Process

First Trust’s equity  team is comparable to peers, resulting in an Average People Pillar rating. There’s a deep bench of seven managers listed on the fund. Experience on the team is abundant, with 19 years of average portfolio management experience. Together, they manage a total of 105 strategies, with mixed prospects. The asset-weighted average Morningstar Medalist Rating across the strategies is Neutral. This means, in aggregate, they are not positioned to deliver positive alpha relative to the category median. This group has successfully retained management talent, with no departures in the past five years. 

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

People

First Trust meets the industry standard for stewardship, but it could do more to align itself with investors. It earns an Average Parent rating.

This is a team-oriented organization that eschews star managers. While exchange-traded funds represent the bulk of the firm's assets, First Trust bypasses the competitive market for low-cost beta funds, instead opting for complex strategies with higher management fees. However, the firm's focus on ETFs for future product development underpins its commitment to tax efficiency and transparency. Some of its thematic strategies appear trendy, but it stands behind them and rarely liquidates funds. 

The firm is a private partnership, controlled by Jim Bowen, the CEO. Many senior managers are limited partners. This ownership structure helps the firm stay focused on the long term and promotes retention, which has been strong for the investment team. The firm has grown considerably over the past decade and is among the largest providers of actively managed ETFs, as well as unit investment trusts. As it has grown, the firm has expanded its investment team and beefed up its technology infrastructure.

First Trust's focus is on educating advisors and providing them solutions. This may benefit investors indirectly, but First Trust could do more to directly align with investors by cutting fees and limiting trendy strategies.

Parent

First Trust Dow Jones Internet Index Fund

FDN tracks a market-cap-weighted index of the largest and most liquid US Internet companies.

SPDR Bloomberg High Yield Bond ETF

First Trust NASDAQ-100 Technology Sector Index Fund

SPDR S&P Oil & Gas Exploration & Production ETF

We performed a screening of mid-cap ETFs - defined as having Assets Under Management (AUM) between $2 billion and $10 billion - to determine what funds had the largest change in net assets on the week, according to data from etfdb.com. Only non-leveraged funds were considered.

Junk Bond Fund Get Bigger, Internet And Gas Shrink

Global X Education ETF

Global X FinTech ETF

Global X Video Games & Esports ETF 

Proshares Online Retail ETF

Pacer BioThreat ETF

A highly-mutated Covid-19 variant designated as BA.2.86, referred to as "Pirola," has surfaced and been detected in many countries.

Social-Distancing ETFs Worth a Look As "Pirola" Covid Variant Spreads

First Trust NASDAQ Cybersecurity ETF

iShares North American Tech-Multimedia Networking ETF

iShares U.S. Telecommunications ETF

Pacer Data And Digital Revolution ETF

Cisco (CSCO) beat on both earnings and revenues but offered a downbeat guidance for the fiscal year. This has put ETFs with the largest allocation to this networking giant in focus.

Cisco Beats on Q4 Earnings: ETFs in Focus

The First Trust Dow Jones Internet ETF (FDN) was launched on 06/19/2006, and is a passively managed exchange traded fund designed to offer broad exposure to the Technology - Internet segment of the equity market.

Should You Invest in the First Trust Dow Jones Internet ETF (FDN)?

The Nasdaq 100 and Invesco QQQ Trust ETF are experiencing a rapid surge, potentially leading to a "meltup" phase in the market. Technical evidence suggests this surge could continue, with QQQ potentially reaching $400 in a matter of weeks. The First Trust Dow Jones Internet Index Fund ETF is a more focused ETF that correlates highly with QQQ and could be used to capture the breakout.

Nasdaq 100 Meltup Makes FDN A Near-Term Winner (Technical Analysis)

Fidelity Cloud Computing ETF

iShares North American Tech-Software ETF

Salesforce stock surged post upbeat earnings and guidance. These ETFs should benefit.

Salesforce Surges Post Earnings: ETFs to Benefit

FDN is a longstanding internet-focused ETF that suffered a significant drawdown over the last 18 months. The fund's large cap-driven underperformance could now become a tailwind as historically low valuations rise.

FDN: This Internet ETF Stalwart Is Finally A Buy

Global X Funds - Global X E-commerce ETF

Amplify Online Retail ETF

Invesco NASDAQ Internet ETF

Online holiday sales hit a record high buoyed by heavy discounts, which persuaded shoppers to spend on everything from toys to electronics amid the rising inflation environment.

Online Holiday Sales Hit Record High: 5 ETFs to Tap

Cyber Monday has become the heaviest online spending day ever. This is especially true as shoppers spent a record $11.3 billion in online shopping, up 5.8% year over year, according to Adobe.

5 ETFs to Splurge on Cyber Monday Record Sales

Cisco (CSCO) cheered investors with first-quarter fiscal 2023 results. The networking giant beat on both earnings and revenues, and offered an encouraging revenue guidance for the current quarter.

ETFs to Tap as Cisco Tops Fiscal Q1 Earnings

FDN is built to track the success of some of the most popular internet stocks. But for a while now, it has been tracking the failure of those very same stocks.

FDN: Solid ETF, Awful Time To Own It

Invesco S&P SmallCap Information Technology ETF

Invesco Dynamic Software ETF

Invesco Dynamic Networking ETF

U.S. tech stocks have been hitting rough weather this year. However, new Covid variants may be "pretty troublesome".

Least-Hurt Top-Ranked Tech ETFs You May Consider Now

Cisco Systems (CSCO) beat on both earnings and revenues, and provided an upbeat revenue forecast for the October quarter, citing easing supply-chain constraints.

Cisco Pops on Earnings Beat: ETFs to Buy

Vanguard Intermediate-Term Treasury ETF

Intermediate treasury ETF and internet ETF traded with an outsized volume yesterday.

2 ETFs to Watch for Outsized Volume on Intermediate Treasury and Internet ETFs

FDN invests in internet commerce and internet services companies. In December 2021, I warned that FDN is prone to decline as the growth premia were about to become thinner.

FDN: More Realistic Valuations, Growth Prospects Trimmed

O'Shares Global Internet Giants ETF

Inflation for goods sold online eased in June as online price rose modestly 0.3% year over year in June.

Online Inflation Eases in June: ETFs in Focus

Amplify Transformational Data Sharing ETF

Global X Cybersecurity ETF

iShares Robotics & Artificial Intelligence Multisector ETF

First Trust Cloud Computing ETF

VanEck Vectors Semiconductor ETF

Let's look at some prominent technology areas that are worth buying the dips on expectations of favorable trends.

6 ETFs From Popular Tech Areas to Consider Now

Though Cisco beat on earnings, it missed on revenues and lowered its revenue guidance for the ongoing quarter on concerns about China's COVID shutdown that accelerated supply-chain problems.

Cisco Tumbles on Sales View Cut: ETFs in Focus

ARK Web x.0 ETF

Global X Robotics & Artificial Intelligence ETF

ETFMG Prime Cyber Security ETF

First Trust Nasdaq Artificial Intelligence & Robotics ETF

iShares PHLX Semiconductor ETF

Let's take a look at some prominent technology areas that are worth buying the dips on expectations of favorable trends.

5 Top Tech Areas That Deserve Your Attention Now

Invesco Golden Dragon China ETF

ARK Fintech Innovation ETF

Amplify Emerging Markets FinTech ETF

The S&P 500 has probably logged its best week since November 2020. These ETFs gained more than 20% in the week.

5 ETFs Up 20%+ in S&P 500's Best Week Since November 2020

Online spending is expected to hit a record $1 trillion in 2022, the highest level ever, per a new study by Adobe.

Online Spending to Hit Record in 2022: 5 ETFs to Surge

ETFMG Prime Mobile Payments ETF

Internet and financial technology-related exchange traded funds retreated on Wednesday after PayPal (NasdaqGS: PYPL) plunged on a mixed fourth quarter and weak 2022 outlook. On Wednesday, the First Trust Dow Jones Internet Index Fund (FDN) dropped 2.1%, the ETFMG Prime Mobile Payments ETF (NYSEArca: IPAY) declined 3.2%, and the Global X FinTech ETF (NasdaqGM: FINX) decreased 4.3%.

PayPal Weakness Drags on Internet, Fintech ETFs

Vanguard Telecommunication Services ETF

Netflix (NasdaqGS: NFLX) shares plunged on Friday, dragging down communication services sector-related exchange traded funds, after the online streamer revealed slowing subscriber growth. On Friday, the Invesco NASDAW Internet ETF (PNQI) declined 4.2%, the First Trust Dow Jones Internet Index Fund (FDN) decreased 2.9%, and the Vanguard Communication Services Index Fund ETF Shares (VOX) dropped 2.3%.

Netflix Deals a Blow to Internet, Communication Services ETFs

FDN is a ~$10 billion portfolio cramming mega/large-cap tech names with strong growth prospects, though coming with stupendous multiples, even for the traditionally generously valued IT sector. FDN is an ETF with what I would like to call an ultimate growth mix, though with quality being also rather strong, which slightly offsets risks.

FDN: Robust Growth With Terrible Valuation

Online prices in November rose a record 3.5% year over year, marking the 18th consecutive month of increase.

News for First Trust Dow Jones Internet Index Fund ETF (FDN)