First Trust Utilities AlphaDEX Fund (FXU).
One of the clear-cut trends of 2014 has been lower, not higher, interest rates. The conflict in Ukraine has clearly created even greater demand for U.S. Treasuries, as the 10-year yield is now 40 basis points lower than it was at the start of 2014. When the 10-year moves from 3.01% to 2.61% — when the 10-year might drop even more — the spread between utility dividends widens. More specifically, they widen until equity investors take a bit more risk by scooping up high yielding utility stocks.
What makes FXU unique is the tracking of the AlphaDEX index — an index of companies with verifiable revenue growth, return on assets and price-to-book (P/B). The collective price-to-sales for FXU is 1.2 and the P/B is 1.4. Over a 1-year period and a 5-year period, FXU has outperformed its big brother, SPDR Select Sector Utilities (XLU).
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Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc., and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationship.