Remember the momentum sell-off that tripped previously high-flying sectors? You know the one that occurred late in the first quarter and lasted into the early part of the second quarter? The one that wrought havoc on biotechnology, Internet and social media stocks and exchange traded funds?
Well, those industry ETFs have come roaring back. For example, the First Trust Dow Jones Internet Index Fund (NYSEArca: FDN) has surged 14.3% since May 8. Biotech ETFs have gotten on the act as well. The First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT), the only biotech ETF to see second-quarter inflows, has climbed 16% since May 8. [An Ignored Biotech Rally]
Rallies for those ETFs and several others have proven to be very good news for the First Trust Dorsey Wright Focus Five Fund (NasdaqGM: FV), and ETF of ETFs that holds FBT, FDN and three other First Trust AlphaDEX ETFs that have momentum elements to them.
Looking back, FV could have easily been victimized by bad timing. The ETF debuted on March 7. A month later, FBT had tumbled 11.1% while FDN had plunged almost 14%. FBT and FDN currently combine for over 41% of FV’s weight. [Get Five on it With This New ETF]
FV tracks the Dorsey Wright Focus Five Index which is comprised of “five First Trust sector and industry based ETFs identified by DWA’s index methodology to offer the greatest potential to outperform the other ETFs in the selection universe,” according to First Trust.
Said another way, the five First Trust sector and industry ETFs with the best relative strength traits will gain entry to FV. If a current holding becomes a laggard and its relative strength falters, it will depart the ETF.
Despite the struggles of FBT and FDN soon after FV debuted, the new ETF was quick to gain $100 million in assets under management, reaching that much ballyhooed point about five weeks after coming to market. In just three months, FV has more than tripled in size to $337 million. [Focus Five ETF Quick to $100M in AUM]