The combination of an Average People Pillar rating and a Below Average Process Pillar rating limit  First Trust Cnsmr Discret AlphaDEX® ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a sizable cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The strategy gets a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in yield exposure and liquidity exposure compared with category peers. High yield exposure is attributed to holding high dividend-paying or buyback stocks, and is suitable for income seekers outside of fixed-income. 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 is industry standard, albeit with some strong attributes like overall affordable fees, but is held back by low portfolio manager retention. This earns the firm an Average Parent Pillar rating.

Analyst Rating

Capri Holdings Ltd

DraftKings

Uber

Murphy USA

PulteGroup

Spotify

Under Armour

Toll Brothers

Lithia Motors

Penn Entertainment

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. First Trust Consumer Discret AlphaDEX®Fd earns a Below Average Process Pillar rating. 

The process is strengthened by the stability of the management team. Specifically, the fund has not seen a manager change in the last 11 years. However, the rating is limited by the fund's weak 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 parent firm's five-year risk-adjusted success ratio of 31% also weakens the process. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's relatively low success ratio suggests that the firm could do better across its fund lineup.

 This strategy leans toward smaller, more undervalued companies compared with its average peer in the Consumer Cyclical Morningstar Category. Analyzing additional factors, this strategy has continually had more high-yield exposure than the Morningstar Category average during recent years, with the portfolio holding more stocks with high dividend or buyback yields. High-yield stocks tend to be associated with more mature, profitable businesses that can grow as well as provide a stream of income. Such stocks could suffer, however, if setbacks force them to cut their dividends. In recent months, the strategy was more exposed to the Yield factor compared with its Morningstar Category peers as well. This strategy has also been exposed to liquid stocks during these years. More-liquid assets are easier to buy and sell without adversely moving their prices and tend to provide some ballast during market selloffs. They also are easier to sell to meet redemptions if a host of investors decide to leave the fund in a short period of time. Compared with category peers, the strategy also had more exposure to the Liquidity factor in the most recent month. Additionally, the strategy had less exposure to high-momentum stocks compared with Morningstar Category peers in recent months. Momentum strategies typically bet that stocks that have recently outperformed will continue to do so, and those that have recently underperformed will keep lagging. Avoiding the former and buying the latter could indicate that managers are averse to chasing momentum.  More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in communication services by 6.8 percentage points in terms of assets compared with the category average, and its technology allocation is similar to the category. The sectors with low exposure compared to category peers are consumer cyclical and consumer defensive, with consumer cyclical underweighting the average portfolio by 7.3 percentage points of assets and consumer defensive similar to the average. The portfolio is composed of 121 holdings and its assets are more dispersed than peers in the category. In particular, 14.9% of the fund’s assets are concentrated in the top 10 fund holdings, compared to the typical peer's 48.6%.

Below Average

Process

First Trust’s equity team is good but unexceptional, earning the strategy 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 been working together for a while and has been successful in retaining talent compared to peers, with no departures in the last 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.

Average

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 Consumer Discretionary AlphaDEX Fund

FXD tracks an index of large- and mid-cap US consumer discretionary stocks. The underlying index uses multi-factor selection and tiered equal-weighting.

Designed to provide broad exposure to the Consumer Discretionary - Broad segment of the equity market, the First Trust Consumer Discretionary AlphaDEX ETF (FXD) is a passively managed exchange traded fund launched on 05/08/2007.

Should You Invest in the First Trust Consumer Discretionary AlphaDEX ETF (FXD)?

ETFMG Travel Tech ETF

First Trust NASDAQ Global Auto Index Fund

Defiance Hotel Airline and Cruise ETF

Fidelity MSCI Consumer Discretionary ETF

Fidelity MSCI Consumer Staples ETF

First Trust Consumer Staples AlphaDEX Fund

Goldman Sachs Future Consumer Equity ETF

iShares Evolved U.S. Discretionary Spending ETF

First Trust S-Network E-Commerce ETF

iShares U.S. Consumer Services ETF

iShares U.S. Consumer Goods ETF

ALPS Global Travel Beneficiaries ETF

iShares Global Consumer Staples ETF

Tema Luxury ETF

Roundhill S&P Global Luxury Etf

Direxion Daily Travel & Vacation Bull 2X Shares

Invesco DWA Consumer Cyclicals Momentum ETF

Invesco S&P SmallCap Consumer Staples ETF

 Invesco S&P SmallCap Consumer Discretionary ETF

Invesco DWA Consumer Staples Momentum ETF

Invesco S&P 500 Equal Weight Consumer Discretionary ETF

Invesco S&P 500 Equal Weight Consumer Staples ETF

VanEck Vectors Retail ETF

iShares Global Consumer Discretionary ETF

Vanguard Consumer Discretionary ETF

Vanguard Consumer Staples ETF

Consumer Staples Select Sector SPDR Fund

Consumer Discretionary Select Sector SPDR Fund

SPDR S&P Retail ETF

Some consumer discretionary stocks have performed better than others. Luxury, homebuilding, and travel have been a bright spots.

Outlook For Consumer Discretionary Stocks Amid Shifting Spending Patterns

Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Consumer Discretionary AlphaDEX ETF (FXD) provides investors broad exposure to the Consumer Discretionary ETFs category of the market.

Is First Trust Consumer Discretionary AlphaDEX ETF (FXD) a Strong ETF Right Now?

First Trust Nasdaq Semiconductor ETF

iShares iBoxx High Yield Corporate Bond ETF

iShares 7-10 Year Treasury Bond ETF

iShares iBoxx $ Investment Grade Corporate Bond ETF

Invesco QQQ

Schwab 5-10 Year Corporate Bond ETF

SPDR S&P 500 ETF Trust

iShares 20+ Year Treasury Bond ETF

U.S. equities rallied during the Refinitiv Lipper fund-flows week ended March 29, 2023, but fund flows remained defensive. On the equity side of the equation, both equity ETF (-$12.6 billion) and conventional equity funds (-$7.9 billion) witnessed net outflows for the week.

Despite Equity Rally, Conventional Fund And ETF Investors Stay On The Sidelines This Week

iShares California Muni Bond ETF

Deutsche Bank

First Citizens BancShares

iShares National Muni Bond ETF

Fund investors were net purchasers of money market funds while being net redeemers of equity funds, taxable bond funds, and tax-exempt fixed income funds for the week. On the domestic equity side of the equation, investors became more risk-seeking for the week.

U.S. Weekly FundFlows Insight Report: Despite Rally In U.S. Stocks, Equity ETF And Fund Investors Were Net Redeemers For Fund Flows Week

The first month of 2023 (and the last month of the retail industry's Q4 2022) saw America's largest party supply store file for Chapter 11 bankruptcy, a move that the StarMine credit models had predicted about a year ago. According to StarMine, Bed Bath & Beyond scores in the bottom decile when it comes to the Relative Valuation, Val-Mo, and Short Interest models.

Inflation Continues To Dampen U.S. Retail Sales While Luxury Shines

Avantis U.S. Small Cap Value ETF

VictoryShares US EQ Income Enhanced Volatility Wtd ETF

Pacer US Cash Cows 100 ETF

VictoryShares US Small Cap High Div Volatility Wtd ETF

Invesco Zacks Mid-Cap ETF

WisdomTree U.S. SmallCap Dividend Fund

Dimensional US Targeted Value ETF

iShares Core Dividend Growth ETF

WisdomTree US Smallcap Quality Dividend Growth Fund

WisdomTree US Quality Dividend Growth Fund

WisdomTree U.S. High Dividend Fund

SPDR Dow Jones Industrial Average ETF

Global X SuperDividend US ETF

TrueShares Low Volatility Equity Income ETF

WisdomTree U.S. LargeCap Dividend Fund

WisdomTree U.S. MidCap Dividend Fund

WisdomTree U.S. Total Dividend Fund

ALPS Equal Sector Weight ETF

Invesco S&P 500 Equal Weight Communication Services ETF

Fidelity Blue Chip Growth ETF

American Century Focused Dynamic Growth ETF

First Trust Morningstar Dividend Leaders Index Fund

Fidelity MSCI Energy Index ETF

First Trust Technology AlphaDEX Fund

This article summarizes the performance of the entire U.S. equity market by examining 1Y, 3Y, 5Y, and 10Y returns for 850+ ETFs across 40 categories. Major indices declined, but investing in Energy, High-Dividend, and Large-Cap Value ETFs softened the blow. Meanwhile, searching for the bottom in mega-cap growth and thematic ETFs didn't work.

U.S. Equity ETFs: The Best And Worst Of 2022

Advisorshares Hotel ETF

Advisorshares Restaurant ETF

Global X Funds - Global X E-commerce ETF

Nasdaq F&B Shs Nasdaq Food & Beverage

Amplify Online Retail ETF

iShares Evolved U.S. Consumer Staples ETF

Proshares Online Retail ETF

Invesco Dynamic Food & Beverage ETF

40% of the online merchandise for U.S. retailers is on sale as we enter Black Friday week of 2022. The average percent discount in November is 36.3%; this has come down from the YTD levels of 37.6% and is significantly below the pre-pandemic levels.

U.S. Retailers Ramp Up Black Friday Deals

John Hancock Multifactor Consumer Discretionary ETF

John Hancock Multifactor Consumer Staples ETF

The mismatch between supply and demand within the retail space has reversed in advance of this year's holiday shopping season. Higher prices that retailers have successfully implemented since the pandemic are not going to reverse entirely.

Retail Outlook: Who Will Be In The Driver's Seat This Holiday Season?

The U.S. consumer sentiment declines in early June amid persistently high inflation levels.

US Consumer Sentiment Dips in June: Will ETFs Suffer?

The broader retail space has been weak relative to the S&P 500 so far this year. On a YTD basis, the VanEck Vectors Retail ETF has underperformed the S&P 500 by 4.5 percentage points, trading down by 18.2% as of today.

Weakness In Retail

The consumer confidence reading slips in May amid the rising interest rates and continuous high inflation levels.

Will ETFs Suffer as US Consumer Confidence Dips in May?

The U.S. consumer sentiment declines in early May amid persistently high inflation levels.

US Consumer Sentiment Dips in May: Will ETFs Suffer?

The consumer confidence reading has edged down in April amid rising interest rates and persistently high inflation levels.

Will ETFs Suffer as US Consumer Confidence Dips in April?

The U.S. consumer sentiment has improved in early April amid strong labor market and recovering U.S. economy.

US Consumer Sentiment Improves in April: Will ETFs Gain?

The consumer confidence reading has edged up in March amid a strong job market and recovering U.S. economy.

Will ETFs Gain as US Consumer Confidence Improves in March?

The U.S. consumer sentiment takes a hit in late March from the rising concerns over surging inflationary levels.

Will ETFs Suffer Due to Weak US Consumer Sentiment Reading?

The U.S. consumer sentiment takes a hit in early March from the rising concerns over surging inflationary levels.

US Consumer Sentiment Stays Weak in March: Will ETFs Suffer?

US Consumer Discretionaries have fallen back to old support relative to Staples.

Relative Support For Consumer Discretionary Stocks

The U.S. consumer sentiment takes a hit in February owing to the rising concerns over surging inflationary levels.

US Consumer Sentiment Drops Again: Will ETFs Feel the Brunt?

The dismal consumer confidence reading might affect the consumer discretionary sector, which attracts a chunk of consumer spending amid rising inflation levels.

Will ETFs Suffer as US Consumer Confidence Drops in February?

The U.S. consumer sentiment takes a hit in early February from the rising concerns over surging inflationary levels.

US Consumer Sentiment Slips in February: Will ETFs Suffer?

The disappointing consumer confidence reading might affect the consumer discretionary sector, which attracts a major portion of consumer spending amid rising inflation levels.

Will ETFs Suffer as US Consumer Confidence Weakens in January

U.S. consumers seem to be optimistic about improving employment conditions and recovering U.S. economy from the pandemic-led slowdown.

ETFs to Gain as US Consumer Confidence Improves in December

First Trust Nasdaq Retail ETF

Retail sales have posted gains in four consecutive months but November is the slowest pace of the four. Most categories were up in November though breadth was weaker than in October.

News for First Trust Consumer Discretionary AlphaDEX Fund ETF (FXD)