Among newer exchange traded funds, particularly those that are 12 to 18 months old, the First Trust Dorsey Wright Focus 5 ETF (NasdaqGM: FV) is the stuff ETF legends are made of.
The First Trust Dorsey Wright Focus 5 ETF debuted in March 2014 and since has been on a torrid pace of asset-gathering rivaled by few new ETFs. FV needed less than nine months of work to top $1 billion in assets and has needed just seven months to more than triple in size from there. Today, FV has $3.8 billion in assets under management. [Another Good Year for New ETFs]
More important FV’s asset-gathering acumen is whether or not its performance and its 0.94% annual fee, which is high among ETFs, has merited all that adulation from advisors and investors. The answer is “yes.” Since coming to market, FV is up 23%, more than double the 10.6% returned by the S&P 500 over the same period.
“The Dorsey Wright Focus Five Index is designed to provide targeted exposure to the five First Trust sector and industry based ETFs that DWA believes offer the greatest potential to outperform the other ETFs in the selection universe. To construct the index, Dorsey, Wright & Associates (DWA) begins with the universe of First Trust sector and industry ETFs. Using the DWA relative strength ranking system, the ETFs are compared to each other to determine inclusion by measuring each ETF’s price momentum relative to other ETFs in the universe,” according to Captain John Charts. “Think of this as an ETF that contains the top five relative strength places to be, inside one ETF using the First Trust ETF products.”
Call it relative strength or momentum. FV has both and it is due in large part to its healthcare exposure. As Morningstar notes, a large part of FV’s performance success (the ETF is up 23.6% since debuting) is attributable to its biotech exposure. FV’s largest holding is a 26.4% weight to the First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT), one of the top-performing ETFs since the March 2009 market bottom. FV’s second-largest holding is the $3.75 billion First Trust Health Care AlphaDEX Fund (NYSEArca: FXH), an ETF with a biotech allocation of almost 21.2%. [Behind the Rise of a Strategic Beta Healthcare ETF]
FV’s other holdings are the First Trust Dow Jones Internet Index Fund (NYSEArca: FDN), First Trust Consumer Staples AlphaDEX Fund (NYSEArca: FXG) and the First Trust Consumer Discretionary AlphaDEX Fund (NYSEArca: FXD).
FV is off 1.5% over the past week, but its technicals are still strong, indicating the recent dip could be a buying opportunity. Here’s Captain John with the technical take.
“This chart shows an interesting development. After making a bullish head& shoulder continuation pattern, it has returned to the neckline to test what may be support! Looks like good risk/reward here.”