The AlpahDEX method categorizes stocks by growth, core and value. Growth stocks are ranked by price momentum, sales growth and sales to price ratio. Value stocks are screened for book value to stock price, cash flow to price ratio and return on assets. Lastly, Core stocks are scored on both growth and value, but the higher score is used.
Eric Anderson, vice-president at First Trust, said that the AlphaDEX ETFs have attracted interest among wealth managers and fund-of-fund managers as the ETFs have the potential to generate higher long-term returns with lower volatility than cap-weighted indices.
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Max Chen contributed to this article.