Heading into 2017, there was some concern about the ability of the utilities sector and the related exchange traded funds to deliver for investors against the backdrop of multiple interest rate increases by the Federal Reserve.
Give the First Trust Utilities AlphaDEX Fund (NYSEArca: FXU), a smart beta spin on utilities, some credit. FXU is up nearly 4% year-to-date and hit an all-time on Thursday.
Like the other AlphaDEX funds, FXU is “based “on growth factors including three, six and 12-month price appreciation, sales to price and one year sales growth, and, separately, on value factors including book value to price, cash flow to price and return on assets,” according to First Trust.
Utilities stocks and ETFs are extremely sensitive to changes in interest rates. Still, some investors see opportunity with rate-sensitive assets such as FXU and real estate ETFs, noting that 10-year yields are overbought and sentiment against the likes of FXU is at bearish extremes, which could create opportunity from the long side with the utilities sector.