ETF Risk Report: FXO Buyer beware: Every ETF holds the full risk of its underlying equities Disclosures in the best interest of investors
First Trust Financials AlphaDEX Fund Gray Swan Event Risks exist for every equity held by FXO. Gray swan events include accounting fraud, management failures, failed internal controls, M&A problems, restatements, etc. These risks occur infrequently, but Gray Swan Event Factor for FXO 0.98% consistently for all equities. Equities account for 88.99% of FXO’s assets. Most investors ignore these risks until after they are disclosed; whereupon a stock’s price drops precipitously. Just as insurance companies can predict likely costs for a driver’s future car accidents based on the driver’s history, Watchdog Research contacts each ETF asking how they notify investors about we predict the likely cost (price drop) for FXO following accounting governance risks in equities in their fund. We will publish their response gray swan disclosures within its holdings. The expected when received. price decrease across the FXO equity portfolio is 0.98%. However, individual equity risks vary signi cantly. This report helps investors know their risk exposure.
Inception Date: 05/08/2020 Year-to-Date Return: 21.84% The First Trust Financials AlphaDEX Fund tracks investment results of the StrataQuant Financial Index, a Net Assets: $1.03b 1-Year Return: 102.72% modi ed equal-dollar-weighted index composed of large- cap stocks from nancial companies in the Russell Price: $41.60 3-Year Return: 13.13% 1000 Index that exhibit growth and value factors, and Net Asset Value (NAV): $41.56 5-Year Return: 15.52% may generate positive alpha, or outperform in risk- adjusted returns, relative to traditional passive-style Net Expense Ratio: 0.62% Yield: 2.06% indices. The Fund uses an indexing approach to replicate the performance of the Index by investing in the common As of: 03/31/2021 stocks that comprise the Index. The Index rebalances and reconstitutes quarterly.
Company Ticker Held Current GSEF Category Value Top Holdings by Value
Blackstone Group L.P. BX Long 0.54% Low $25.2m This table shows Gray Swan Event Factors for the top ten equity holdings by dollar-value, as of Oct 1, 2021. Mgic Investment Corp. MTG Long 0.68% Low $23.1m Investors should invest in ETFs only when they adequately Jeffries Financial ... JEF Long 2.19% Mid $22.8m understand an ETF’s risks. Buyer beware. ETF prospectuses generally acknowledge that ETF managers First American Fina... FAF Long 0.88% Low $22.6m do NO traditional risk analysis on equities in their fund. Credit Acceptance C... CACC Long 2.40% Mid $21.7m Our Gray Swan Event Factors are meant to inform investors of signi cant traditional accounting and Markel Corp. MKL Long 0.44% Low $21.2m managerial risks for the equities in each ETF.
Goldman Sachs Group... GS Long 1.68% Low $20.9m ETF Risk Reports are published quarterly on dedicated Old Republic Intern... ORI Long 1.79% Low $20.8m platforms like Factset, Re nitiv, Capital IQ etc. Weekly updates are available for a paid subscription. Assured Guaranty Ltd. AGO Long 0.73% Low $20.7m For more details contact: [email protected] Berkshire Hathaway ... BRKB Long 0.42% Low $20.7m
Company Ticker Held Current GSEF Category Value Riskiest Holdings
New York Community ... NYCB Long 6.37% High $14.7m This table shows the individual Gray Swan Event Factors for this ETF’s most at-risk equities as of Oct 1, 2021. Ares Management Lp ARES Long 3.14% Mid $19.5m The average equity GSEF across 6,500 public equities is M&T Bank Corp. MTB Long 2.92% Mid $13m 1.25%. Equities with a GSEF between 5% and 10% are considered high risk. Equities with a GSEF above 10% are Credit Acceptance C... CACC Long 2.40% Mid $21.7m extreme risks. Gray Swan Event Factors are derived from skilled analysts Jeffries Financial ... JEF Long 2.19% Mid $22.8m charting 15 years of negative gray swan event disclosures Fnb Corp. FNB Long 1.85% Low $11.9m against stock price declines following such disclosures. A Gray Swan Event Factor is an assessment of the Primerica, Inc. PRI Long 1.79% Low $4.22m likelihood of, and 12-month price risk for, gray swan Old Republic Intern... ORI Long 1.79% Low $20.8m events for each equity.
Goldman Sachs Group... GS Long 1.68% Low $20.9m
Allstate Corp. ALL Long 1.68% Low $20.5m
Watchdog Research, Inc. • www.watchdogresearch.com • [email protected] • (855) 820-6272 This table lists the equity holdings for First Trust Financials AlphaDEX Fund ranked by highest GSE Factor (riskiest rst). We list all equities (US and foreign) for this ETF. However, some foreign listings only show via a ticker.
To further evaluate risks, you can access details for each company by opening its Brief Watchdog Report available for viewing and pdf download. The report is free to readers for their personal consumption and it includes the executive summary data pulled from the full Watchdog Report.
To learn more about the full Watchdog and GSEF Reports go to last page or visit watchdogresearch.com.
Company Access Details Ticker Held Current GSEF Category Value
New York Community Bancorp Inc. Watchdogresearch.com/watchdog/$NYCB NYCB Long 6.37% High $14.7m
Ares Management Lp Watchdogresearch.com/watchdog/$ARES ARES Long 3.14% Mid $19.5m
M&T Bank Corp. Watchdogresearch.com/watchdog/$MTB MTB Long 2.92% Mid $13m
Credit Acceptance Corp. Watchdogresearch.com/watchdog/$CACC CACC Long 2.40% Mid $21.7m
Jeffries Financial Group, Inc. Watchdogresearch.com/watchdog/$JEF JEF Long 2.19% Mid $22.8m
Fnb Corp. Watchdogresearch.com/watchdog/$FNB FNB Long 1.85% Low $11.9m
Primerica, Inc. Watchdogresearch.com/watchdog/$PRI PRI Long 1.79% Low $4.22m
Old Republic International Corp. Watchdogresearch.com/watchdog/$ORI ORI Long 1.79% Low $20.8m
Goldman Sachs Group Inc. Watchdogresearch.com/watchdog/$GS GS Long 1.68% Low $20.9m
Allstate Corp. Watchdogresearch.com/watchdog/$ALL ALL Long 1.68% Low $20.5m
T. Rowe Price Group, Inc. Watchdogresearch.com/watchdog/$TROW TROW Long 1.46% Low $12.5m
Willis Towers Watson Plc. Watchdogresearch.com/watchdog/$WLTW WLTW Long 1.44% Low $8.5m
Jpmorgan Chase & Co. Watchdogresearch.com/watchdog/$JPM JPM Long 1.36% Low $8.85m
Santander Consumer Usa Holdings Inc. Watchdogresearch.com/watchdog/$SC SC Long 1.19% Low $19.3m
Lincoln National Corp. Watchdogresearch.com/watchdog/$LNC LNC Long 1.18% Low $4.6m
Morgan Stanley Watchdogresearch.com/watchdog/$MS MS Long 1.18% Low $8.93m
Everest Re Group Ltd. Watchdogresearch.com/watchdog/$RE RE Long 1.07% Low $12.6m
First Horizon Corp Watchdogresearch.com/watchdog/$FHN FHN Long 1.07% Low $15.9m
Citigroup Inc. Watchdogresearch.com/watchdog/$C C Long 1.05% Low $16.7m
Bok Financial Corp Watchdogresearch.com/watchdog/$BOKF BOKF Long 1.03% Low $13m
Evercore Partners Inc. Watchdogresearch.com/watchdog/$EVR EVR Long 1.01% Low $12m
Virtu Financial, Inc. Watchdogresearch.com/watchdog/$VIRT VIRT Long 1.00% Low $18.6m
American Financial Group Inc. Watchdogresearch.com/watchdog/$AFG AFG Long 0.96% Low $12.9m
Us Bancorp Watchdogresearch.com/watchdog/$USB USB Long 0.94% Low $4.39m
Alleghany Corp. Watchdogresearch.com/watchdog/$Y Y Long 0.93% Low $15.7m
Sterling Bancorp. Watchdogresearch.com/watchdog/$STL STL Long 0.93% Low $8.47m
Regions Financial Corp. Watchdogresearch.com/watchdog/$RF RF Long 0.92% Low $8.88m
First Citizens Bancshares Inc. Watchdogresearch.com/watchdog/$FCNCA FCNCA Long 0.91% Low $4.26m
Citizens Financial Group Inc. Watchdogresearch.com/watchdog/$CFG CFG Long 0.91% Low $8.62m
Progressive Corp. Watchdogresearch.com/watchdog/$PGR PGR Long 0.91% Low $15.5m
Moodys Corp. Watchdogresearch.com/watchdog/$MCO MCO Long 0.88% Low $4.12m
First American Financial Corp. Watchdogresearch.com/watchdog/$FAF FAF Long 0.88% Low $22.6m
Stifel Financial Corp. Watchdogresearch.com/watchdog/$SF SF Long 0.84% Low $8.81m
Lpl Financial Holdings Inc. Watchdogresearch.com/watchdog/$LPLA LPLA Long 0.83% Low $4.88m
Pacwest Bancorp. Watchdogresearch.com/watchdog/$PACW PACW Long 0.82% Low $9.26m
Wells Fargo & Company Watchdogresearch.com/watchdog/$WFC WFC Long 0.81% Low $8.62m
Slm Corporation Watchdogresearch.com/watchdog/$SLM SLM Long 0.81% Low $10.6m
Watchdog Research, Inc. • www.watchdogresearch.com • [email protected] • (855) 820-6272 Company Access Details Ticker Held Current GSEF Category Value
Globe Life Inc. Watchdogresearch.com/watchdog/$GL GL Long 0.79% Low $11.8m
Synovus Financial Corp. Watchdogresearch.com/watchdog/$SNV SNV Long 0.77% Low $8.41m
Popular Inc. Watchdogresearch.com/watchdog/$BPOP BPOP Long 0.76% Low $17.4m
White Mountains Insurance Group Ltd. Watchdogresearch.com/watchdog/$WTM WTM Long 0.76% Low $19.6m
Invesco Ltd. Watchdogresearch.com/watchdog/$IVZ IVZ Long 0.76% Low $11.4m
Webster Financial Corp. Watchdogresearch.com/watchdog/$WBS WBS Long 0.75% Low $4.29m
Bank Of America Corp. Watchdogresearch.com/watchdog/$BAC BAC Long 0.75% Low $4.33m
A liated Managers Group, Inc. Watchdogresearch.com/watchdog/$AMG AMG Long 0.73% Low $8.24m
Assured Guaranty Ltd. Watchdogresearch.com/watchdog/$AGO AGO Long 0.73% Low $20.7m
Wintrust Financial Corp. Watchdogresearch.com/watchdog/$WTFC WTFC Long 0.71% Low $8.94m
Hanover Insurance Group, Inc. Watchdogresearch.com/watchdog/$THG THG Long 0.70% Low $16.1m
Unum Group Watchdogresearch.com/watchdog/$UNM UNM Long 0.70% Low $14.8m
Zions Bancorporation Watchdogresearch.com/watchdog/$ZION ZION Long 0.69% Low $14.8m
Reinsurance Group Of America Inc. Watchdogresearch.com/watchdog/$RGA RGA Long 0.68% Low $8.21m
Kemper Corp. Watchdogresearch.com/watchdog/$KMPR KMPR Long 0.68% Low $15.2m
Onemain Holdings, Inc. Watchdogresearch.com/watchdog/$OMF OMF Long 0.68% Low $16.5m
Mgic Investment Corp. Watchdogresearch.com/watchdog/$MTG MTG Long 0.68% Low $23.1m
Apollo Global Management Llc Watchdogresearch.com/watchdog/$APO APO Long 0.68% Low $16.7m
East West Bancorp Inc. Watchdogresearch.com/watchdog/$EWBC EWBC Long 0.68% Low $4.55m
Cullen/Frost Bankers, Inc. Watchdogresearch.com/watchdog/$CFR CFR Long 0.67% Low $4.45m
Voya Financial, Inc. Watchdogresearch.com/watchdog/$VOYA VOYA Long 0.67% Low $16.8m
Pinnacle Financial Partners Inc. Watchdogresearch.com/watchdog/$PNFP PNFP Long 0.67% Low $4.48m
First Hawaiian, Inc. Watchdogresearch.com/watchdog/$FHB FHB Long 0.67% Low $4.36m
Umpqua Holdings Corp. Watchdogresearch.com/watchdog/$UMPQ UMPQ Long 0.67% Low $13.8m
Msci Inc. Watchdogresearch.com/watchdog/$MSCI MSCI Long 0.65% Low $4.8m
Mercury General Corp. Watchdogresearch.com/watchdog/$MCY MCY Long 0.64% Low $18m
Prosperity Bancshares Inc. Watchdogresearch.com/watchdog/$PB PB Long 0.64% Low $12.5m
Sei Investments Co. Watchdogresearch.com/watchdog/$SEIC SEIC Long 0.60% Low $12.1m
Carlyle Group Inc. Watchdogresearch.com/watchdog/$CG CG Long 0.58% Low $17.1m
Chubb Ltd. Watchdogresearch.com/watchdog/$CB CB Long 0.58% Low $13.8m
Renaissancere Holdings Ltd. Watchdogresearch.com/watchdog/$RNR RNR Long 0.57% Low $7.88m
Raymond James Financial Inc. Watchdogresearch.com/watchdog/$RJF RJF Long 0.57% Low $13.4m
Fifth Third Bancorp. Watchdogresearch.com/watchdog/$FITB FITB Long 0.56% Low $9.34m
Bank Of New York Mellon Corp. Watchdogresearch.com/watchdog/$BK BK Long 0.56% Low $12.8m
Blackstone Group L.P. Watchdogresearch.com/watchdog/$BX BX Long 0.54% Low $25.2m
Keycorp Watchdogresearch.com/watchdog/$KEY KEY Long 0.51% Low $8.81m
Pnc Financial Services Group, Inc. Watchdogresearch.com/watchdog/$PNC PNC Long 0.51% Low $4.31m
Prudential Financial Inc. Watchdogresearch.com/watchdog/$PRU PRU Long 0.50% Low $8.64m
Ally Financial Inc. Watchdogresearch.com/watchdog/$ALLY ALLY Long 0.50% Low $17.2m
Hartford Financial Services Group Inc. Watchdogresearch.com/watchdog/$HIG HIG Long 0.49% Low $19.1m
Principal Financial Group Inc. Watchdogresearch.com/watchdog/$PFG PFG Long 0.49% Low $8.57m
Discover Financial Services Watchdogresearch.com/watchdog/$DFS DFS Long 0.48% Low $17.5m
A ac Inc. Watchdogresearch.com/watchdog/$AFL AFL Long 0.48% Low $20.4m
Watchdog Research, Inc. • www.watchdogresearch.com • [email protected] • (855) 820-6272 Company Access Details Ticker Held Current GSEF Category Value
Franklin Resources Inc. Watchdogresearch.com/watchdog/$BEN BEN Long 0.47% Low $15.6m
Travelers Companies, Inc. Watchdogresearch.com/watchdog/$TRV TRV Long 0.47% Low $12.8m
Ameriprise Financial Inc. Watchdogresearch.com/watchdog/$AMP AMP Long 0.47% Low $4.46m
W. R. Berkley Corporation Watchdogresearch.com/watchdog/$WRB WRB Long 0.46% Low $4.14m
Arch Capital Group Ltd. Watchdogresearch.com/watchdog/$ACGL ACGL Long 0.46% Low $20.6m
Kkr & Co. L.P. Watchdogresearch.com/watchdog/$KKR KKR Long 0.45% Low $17.3m
Cboe Global Markets, Inc. Watchdogresearch.com/watchdog/$CBOE CBOE Long 0.45% Low $4.38m
Huntington Bancshares Inc. Watchdogresearch.com/watchdog/$HBAN HBAN Long 0.45% Low $13.7m
Markel Corp. Watchdogresearch.com/watchdog/$MKL MKL Long 0.44% Low $21.2m
State Street Corp. Watchdogresearch.com/watchdog/$STT STT Long 0.43% Low $13m
Berkshire Hathaway Inc. Watchdogresearch.com/watchdog/$BRKB BRKB Long 0.42% Low $20.7m
Morningstar, Inc. Watchdogresearch.com/watchdog/$MORN MORN Long 0.41% Low $4.24m
Cincinnati Financial Corp. Watchdogresearch.com/watchdog/$CINF CINF Long 0.39% Low $20.6m
Truist Financial Corp - TFC Long - NA $8.89m
Western Alliance Bancorp - WAL Long - NA $4.93m
Bank Ozk - OZRK Long - NA $4.29m
Watchdog Research, Inc. • www.watchdogresearch.com • [email protected] • (855) 820-6272 This is a story about four people investing in ETFs. They are named Everybody, Somebody, Anybody and Nobody.
Everybody wanted to buy ETFs because ETFs are such great investments. “Not so fast,” said Somebody. “Nobody should buy an ETF without rst understanding the accounting and disclosure risks for the ETF’s basket of stocks.”
Everybody scoffed: “Don’t be silly! What could go wrong? Let’s just BUY immediately! Somebody at the ETF must have done that work for us.” Anybody explained how Everybody was wrong in their thinking: “Most ETF prospectuses speci cally say Nobody at the ETF actually does traditional stock risk analysis.” Everybody read many ETF prospectuses, and, sure enough, Anybody was right! So, while Everybody should know the risks before buying an ETF, Nobody was actually doing it.
Until this report was created.
Watchdog Research, Inc. educates investors on accounting and disclosure risks.
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About Watchdog Research, Inc.
Watchdog Research, Inc. is an independent research provider and publisher of Watchdog Reports.
Watchdog Research analysts track gray swan events and critical disclosures for over 4,500 public companies. Gray swan events are reliably predictable, yet infrequent disclosures that expose a company's failures in accounting, internal controls, management integrity and which negatively impact stock prices or increase probabilities for a lawsuit.
Watchdog Reports identify red ags, issues, and other anomalies in nancial reporting. The reports contain warning signs, red ags, material disclosures, and peer analysis for use in valuation, risk analysis, due diligence research, and idea generation. Watchdog Reports are designed to assist investment professionals ful ll their duciary or suitability obligations and to help investors, executives, board members, regulators and educators learn what they need to know about publicly traded companies.
Watchdog Research, Inc. is headquartered in Ave Maria, FL, and it utilizes over 75 specialists and analysts to provide accurate and timely information to its readers. So far, it has delivered 300,000 public company reports to over 27,000 individuals, from over 9,000 investment rms and to 4,000+ public company corporate board members.
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An annual subscription to Watchdog Reports costs $5,000 per year per individual subscriber (group subscription rates available). Subscriptions provide unlimited access to 4,500+ public company Watchdog Reports. Reports are updated weekly. A subscription can also entitle users to download the reports weekly on Factset, Re nitiv (ex Thomson Reuters), Capital IQ or other platforms. Each company Watchdog Report identi es red and yellow ags, issues and other risks for the named company. A full report includes in-depth details and lists original SEC lings and source documents. Reports contain warning signs, attention ags, material disclosures, and peer analysis for use in valuation, risk analysis, due diligence research, and D&O insurance underwriting.
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An annual subscription to our Gray Swan Event Factor Reports costs $8,000 per year per individual subscriber (group subscription rates available). A GSEF annual subscription automatically includes a subscription to our Watchdog Reports. The GSEF is a forward looking valuation factor. It identi es the percent a stock’s price is overstated when accounting for the likelihood of a future negative accounting or disclosure event. These risks are di cult to quantify and tend to be ignored or disregarded as negligible. However, they often lead to substantial losses with each underlying stock. Before buying, selling or recommending a stock, anyone with a duciary or suitability obligation should review the stock’s Gray Swan Event Factor to quantify the stock’s potential losses for future accounting and disclosure risks. GSEF Reports are updated weekly on our website and quarterly on Factset, Re nitiv (ex Thomson Reuters), Capital IQ and other platforms. The full paid version includes detailed break-outs of contributing risk factors, with links to original source materials.
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