First Trust Financials AlphaDEX Fd(ETF) (NYSEARCA:FXO) — There are just a few exchange-traded funds that have a positive return this year and in each of the last four years, but FXO, using its proprietary AlphaDEX method, has returned 5.82% year-to-date (through Sept. 30), 1.2% in 2015, 8.7% in 2014, 40.4% in 2013 and 21.3% in 2012 according to the AAII Journal 2016 Guide to Exchange Traded Funds.
The AlphaDEX ETFs are designed to track the performance of a group of custom “enhanced” indices and employ a “rules-based” fundamental stock selection methodology based on a “quantitative” method to its selections. FXO pays an annual dividend of 38 cents for a 1.55% dividend yield minus a management fee of 0.5%.
Morningstar rates FXO as a four-star ETF. Top holdings include Popular Inc., Lazard Ltd. (NYSE:LAZ), KeyCorp (NYSE:KEY), Santander Consumer USA Holdings Inc (NYSE:SC), Fifth Third Bancorp (NASDAQ:FITB), Jones Lang LaSalle Inc (NYSE:JLL), MarketAxess Holdings Inc. (NASDAQ:MKTX), Ally Financial Inc (NYSE:ALLY), Prudential Financial Inc (NYSE:PRU) and CIT Group Inc. (NYSE:CIT).
This ETF is in a holding pattern after recovering from a decline early this year that dropped it from about $24.20 to $19.52 in mid-February. Since then it rallied for the next nine months, with a minor correction in late-June, to a high of almost $25 in August.
The fund now trades in a narrow range with support at $23.52 and resistance at $24.20. A broader range of support could, on a general market sell-off, test the 200-day moving average at $23.12.
However, this well-balanced, unique approach to stock selection provides the investor with an historically stable base, which has resulted in better-than-average performance over the market for enough years to have confidence that its record will likely continue into the future.