Momentum equities and sectors have largely rebounded from the ills experienced late in the first quarter and into the early part of the second quarter.
Biotechnology stocks and exchange traded funds are prime examples. After flirting with bear market territory in April, biotech ETFs rebounded in such intense fashion that some members of the group posted new all-time highs in August. The Market Vectors Biotech ETF (NYSEArca: BBH) is one of just six ETFs to enter the all-time high club on Wednesday. [Biotech ETFs can Build on Hot August Showings]
Although the momentum swoon is still fresh on the minds of some investors, that has not stopped some ETFs espousing the virtues of momentum from achieving impressive feats of their own. The First Trust Dorsey Wright Focus 5 ETF (NasdaqGM: FV) is a perfect example. Since coming to market in early March, FV has nearly $530 million in assets under management, easily making it one of the most successful ETFs to launch this year in terms of asset-gathering prowess.
FV’s quick success spurred the creation of the First Trust Dorsey Wright International Focus 5 ETF (NasdaqGM: IFV), which has raked in over $32 million in assets under management in just two months on the market.
Some market observers have deemed FV to be “overlooked,” an easily contested point given the size of the fund and advisors’ use of the Dorsey Wright methodology that backs the ETF. Doresy Wright’s indices that focus on relative strength and other technical factors serve as the benchmarks for scores of sector and specialized ETFs, many of which have delivered impressive out-performance of more plain vanilla competing products. [Index Change Helps This ETF]
“In terms of performance, since inception, the fund has lagged the market with a performance of only +3.70% versus 7.98% for the S&P 500 index. We attribute this to the fact the fund had a poor start for the first three months. What impresses us is in the last three months ending August 29, the fund performed +9.09% versus 4.68% for the S&P. The fund began trading at $20.00 per share (range $17.75-$20.87), and is just off its yearly high of $20.54-$20.24 as of September 22, 2014,” notes Reuben Sushman in a piece on Seeking Alpha.
Undoubtedly, FV’s recent outpacing of the broader market has come by way of its health care sector exposure. The ETF holds five other First Trust ETFs, including the First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT) and the First Trust Health Care AlphaDEX Fund (NYSEArca: FXH). As its name implies, FBT is a dedicated biotech ETF, but the $2.3 billion FXH does not short-change investors for biotech exposure with a 15.3% weight to that industry. That is to say, what is good for biotech stocks should trickle down to FV. [Strategic Health Care ETF Soars]
The First Trust Dow Jones Internet Index Fund (NYSEArca: FDN), FV’s third-largest holding at a weight of 19.5%, outpaced the S&P 500 by 80 basis points over the 90 days ended Sept. 23.
First Trust Dorsey Wright Focus 5 ETF
