First Trust Industrials/Producer Durables AlphaDEX Fund (FXR) seeks to track the StrataQuant Industrials Index, which selects and weights U.S. industrial and producer durable goods companies based on growth and value factors. This sector-focused equity ETF targets manufacturers of machinery, aerospace equipment, construction materials, and transportation equipment.
How It Works
FXR uses First Trust's proprietary AlphaDEX methodology, which ranks industrial stocks on growth factors (sales growth, one-year sales growth) and value factors (book value to price, cash flow to price). The top-scoring stocks receive higher allocations through a modified equal-weighting approach. The fund rebalances quarterly to maintain factor exposure and typically holds 40-80 industrial companies, creating concentrated exposure to the highest-ranking firms within the sector.
Key Features
- AlphaDEX factor-based weighting targets industrial stocks with superior growth and value characteristics versus market-cap weighting
- Concentrated portfolio of 40-80 holdings provides focused exposure to top-ranking industrial and producer durable companies
- Quarterly rebalancing maintains systematic factor tilts while capturing changing fundamentals in cyclical industrial sector
Risks
- This ETF can lose value significantly during economic slowdowns when industrial demand falls, potentially declining 40-50% in recessions
- Concentrated sector exposure means poor performance in industrials cannot be offset by other sectors, amplifying volatility
- Factor-based weighting may underperform during periods when growth and value factors fall out of favor with investors
Who Should Own This
Best suited as a satellite holding (5-15% of equity allocation) for investors with medium-to-high risk tolerance and 3+ year time horizons seeking tactical industrial sector exposure. Appropriate for those wanting factor-enhanced industrial exposure beyond broad market ETFs, particularly during economic expansion phases when industrial stocks typically outperform.