Under The Hood: First Trust Financials AlphaDEX

When it comes to ETFs tracing financials, particularly U.S.-based banks and brokers, the big kid on the block is the Financial Select Sector SPDR XLF. Other ETFs that track financials that investors are probably familiar with include the Vanguard Financials ETF VFH, the SPDR KBW Bank ETF KBE and the iShares Dow Jones US Financial Sector IYF. Absent from that list is today's under the hood candidate, the First Trust Financials AlphaDEX ETF FXO. Right off the bat, the knock on FXO is an expense ratio of 0.7%, which is higher than most comparable ETFs for this sector. Then again, there may not be an ETF that is truly comparable to FXO. The 151-stock ETF covers all of the financial sector bases, but ETFs like XLF or VFH focus almost entirely on big money center banks and brokerage firms. FXO is also worth a look because its holdings are not heavily concentrated in just two or three names. MBIA MBI is the ETF's top holding, but gets a weight of just 1.83%. The ETF also offers exposure to diversified financials like Leucadia National LUK, insurance firms such as Everest Re RE and more traditional financial fare such as JPMorgan Chase JPM and Goldman Sachs GS. Assets under management are solid at close to $340.7 million and volume of almost 466,000 shares assures FXO is here to stay. Financials are showing signs of life and if FXO can break resistance at $15, it could be off to the races for this ETF. FXO looks like a good trade with sub-sector diversity that's hard to beat.