Launched on 07/06/2006, the First Trust Capital Strength ETF (FTCS) is a passively managed exchange traded fund designed to provide a broad exposure to the Large Cap Blend segment of the US equity market.
The fund is sponsored by First Trust Advisors. It has amassed assets over $5.29 billion, making it one of the larger ETFs attempting to match the Large Cap Blend segment of the US equity market.
Why Large Cap Blend
Large cap companies typically have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.
Blend ETFs usually hold a mix of growth and value stocks as well as stocks that exhibit both value and growth characteristics.
Costs
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF’s expense ratio.
Annual operating expenses for this ETF are 0.58%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.24%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund’s holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Healthcare sector–about 28.60% of the portfolio. Consumer Discretionary and Industrials round out the top three.
Looking at individual holdings, Facebook, Inc. (class A) (FB) accounts for about 2.44% of total assets, followed by Ebay Inc. (EBAY) and F5 Networks, Inc. (FFIV).
The top 10 holdings account for about 22.22% of total assets under management.
Performance and Risk
FTCS seeks to match the performance of the The Capital Strength Index before fees and expenses. The Capital Strength Index is an equal-dollar weighted index which provides exposure to well-capitalized companies with strong market positions based on strong balance sheets, high degree of liquidity, ability to generate earnings growth & record financial strength & profit growth.
The ETF has lost about -0.80% so far this year and is up about 4.92% in the last one year (as of 07/08/2020). In the past 52-week period, it has traded between $43.11 and $63.33.
The ETF has a beta of 0.89 and standard deviation of 20.86% for the trailing three-year period, making it a medium risk choice in the space. With about 51 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Capital Strength ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FTCS is an outstanding option for investors seeking exposure to the Style Box – Large Cap Blend segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares Core SP 500 ETF (IVV) and the SPDR SP 500 ETF (SPY) track a similar index. While iShares Core SP 500 ETF has $197.59 billion in assets, SPDR SP 500 ETF has $278.64 billion. IVV has an expense ratio of 0.04% and SPY charges 0.09%.
Bottom-Line
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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