First Trust New Constructs Core Earnings Leaders ETF (FTCE) seeks to track companies with superior core earnings quality, focusing on firms whose reported earnings accurately reflect true economic profitability. This equity ETF targets U.S. stocks that demonstrate transparent financial reporting and sustainable earnings generation.
How It Works
FTCE uses New Constructs' proprietary research methodology to identify companies with high-quality core earnings by adjusting GAAP accounting for non-cash items, one-time charges, and accounting distortions. The fund employs a rules-based approach, selecting stocks based on core earnings yield, return on invested capital, and earnings quality metrics. Holdings are weighted by market capitalization with quality score adjustments, rebalanced quarterly to maintain exposure to the most attractive core earnings leaders.
Key Features
- Utilizes New Constructs' forensic accounting analysis to identify companies with genuine earnings quality versus accounting manipulation
- Recently launched in October 2024, offering exposure to an innovative fundamental analysis approach for stock selection
- Zero expense ratio structure makes it cost-competitive for investors seeking quality-focused equity exposure
Risks
- This ETF can lose value if the quality factor underperforms growth or momentum strategies during market rallies favoring speculative stocks
- New fund with limited track record means performance during various market cycles remains unproven and unpredictable
- Concentrated exposure to quality stocks could lag during periods when lower-quality, high-beta names outperform in risk-on environments
Who Should Own This
Best suited for medium-risk tolerance investors with 3-5 year time horizons seeking quality-focused equity exposure as a core or satellite holding (10-30% of equity allocation). Appeals to value-conscious investors who prioritize earnings transparency and sustainable business models over pure growth or momentum strategies.