Understanding the First Trust Energy Alphadex Fund (FXN)

The First Trust Energy Alphadex Fund (ticker: FXN) is an ETF designed to provide exposure to the energy sector. It focuses on a specific group of companies within that industry.

What this ETF is trying to do

FXN invests in energy-related companies. Based on its top holdings, the fund includes various corporations involved in oil and gas activities. Because it focuses on a specific sector, its performance will likely follow the trends of the energy industry.

Top Holdings

The following are some of the largest companies held by this fund (note that this list is partial):

• HF Sinclair Corp (6.21%)

• APA Corp (5.51%)

• Devon Energy Corp (4.74%)

• Range Resources Corp (4.49%)

• Antero Resources Corp (4.46%)

• Expand Energy Corp (4.24%)

• EQT Corp (4.11%)

• ConocoPhillips (3.68%)

• Chord Energy Corp (3.66%)

• Permian Resources Corp Class A (3.59%)

*Holdings can change over time.*

What the numbers show

The fund's share price has seen significant movement recently. The current price is $22.98. An estimated price from roughly one year ago was approximately $16.37.

When looking at performance, it is important to distinguish between price return (the change in the share price) and total return (which includes distributions).

• Year-to-Date (YTD): The price return is approximately 39.53%, while the total return is approximately 41.46%.

• One-Year: The price return is approximately 40.38%, while the total return is approximately 43.28%.

• Three-Year: The price return is approximately 36.62%, while the total return is approximately 46.49%.

The five-year total return is approximately 118.57%.

Income and distribution explanation

FXN provides cash distributions to investors. The distribution yield is approximately 1.83%. This number describes the cash paid out relative to the ETF's price. The fund usually pays these distributions on a quarterly basis, having made 4 payments over the last 12 months.

It is important to remember that a distribution yield is not the same as total return. Total return accounts for both the price changes and the cash paid out.

NAV erosion explanation

"NAV erosion" refers to a decline in the Net Asset Value (the actual value of the assets held by the fund). The supplied data is sufficient to evaluate price erosion, but it does not include enough historical NAV-per-share data to confirm or rule out NAV erosion.

However, regarding price-based evidence, the fund has an erosion score of 100, which is labeled as "No price erosion detected." The erosion severity is rated as "good," and there is no severe erosion-risk flag.

Pros

• Strong Price Growth: The fund has shown significant positive price returns over the one-year and three-year periods.

• Positive Total Returns: The total return figures are higher than the price return figures, showing the impact of distributions.

• Low Erosion Risk: The data shows no detected price erosion.

Cons

• Sector Concentration: Because the fund focuses on energy, it may be more sensitive to changes in oil and gas prices compared to a more diversified fund.

Beginner takeaway

FXN is an energy-focused ETF that has recently experienced strong price and total returns. While it pays a distribution yield, investors should look at the "total return" to see the full picture of how the fund has performed including those payments. Currently, the data shows no signs of price erosion.