ETF Trends
ETF Trends

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]

Over that time, FV is up 4.5%. Obviously, FBT and FDN have helped, but do not overlook the contributions of the First Trust Health Care AlphaDEX Fund (NYSEArca: FXH). FXH is FV’s second-largest holding at 20.3%.

With a nearly 16% weight to biotech stocks, FXH increases FV’s leverage to a biotech rebound. FV has also gotten a lift from the First Trust Consumer Discretionary AlphaDEX Fund (NYSEArca: FXD). FXD is up 4.3% year-to-date, which may not sound like much until considering that is well ahead of cap-weighted discretionary ETFs and that consumer discretionary is the worst-performing sector in the S&P 500 this year. [A Discretionary ETF to Remember]

FV’s other holding is the First Trust Consumer Staples AlphaDEX Fund (NYSEArca: FXG). FXG is up 13% year due to its 5.2% to Green Mountain Coffee (NasdaqGS: GMCR) and its exposure to the bidding war for Hillshire Brands (NYSE: HSH), among other factors.

First Trust Dorsey Wright Focus Five Fund

Table Courtesy: First Trust