This ETF utilizes the AlphaDEX strategy to invest in ex-U.S. small caps. This methodology involves a quantitative screening methodology designed to identify the stocks from a specific universe that have the greatest potential for capital appreciation. Specifically, stocks from the eligible universe are ranked on growth factors such as recent price appreciation, sales-to-price ratio, and one year sales growth, and separately on value factors such as book value to price ratio, cash flow to price ratio, and return on assets. Stocks with the highest scores are included in the benchmark, and the highest weightings are afforded larger weightings.
For those looking to make a play on small cap equities, FDTS
certainly makes for a viable option. The fund has nearly 400 holdings though it is important to note that it has a relatively high focus on Japan, an economy that many believe presents a dismal outlook. As far as small cap exposure is concerned, FDTS
could be a core holding of your portfolio, but only if you truly buy into the AlphaDEX strategy, otherwise this ETF
can make for a great complimentary holding to what small cap allocations you already have in place.