FXD vs PEZ

Key Takeaways

• FXD and PEZ both target U.S. consumer discretionary stocks, but they use fundamentally different construction methods: a multi-factor smart-beta approach versus a pure price-momentum strategy.
• FXD holds roughly 119 stocks with a modified equal-weight design, while PEZ is far more concentrated, holding around 30–40 names weighted by relative strength.
• Both funds carry a 0.60% net expense ratio, but PEZ has a materially higher gross fee and a much smaller asset base and trading volume.
• Concentration risk is markedly higher in PEZ, whose top holdings can exceed 4–5% each, versus roughly 1.5–2% for FXD's largest positions.
• Tickeron AI Verdict: FXD is the preferred choice, reflecting its broader diversification, deeper liquidity, and more balanced factor exposure relative to the concentrated momentum profile of PEZ.

Introduction

Consumer discretionary is among the most economically sensitive corners of the U.S. equity market, making it a natural focal point for investors gauging the health of household spending. FXD and PEZ both offer exposure to this segment, yet they are not direct substitutes. FXD applies a multi-factor, tiered equal-weighting methodology designed to tilt toward growth and value characteristics, while PEZ isolates stocks exhibiting the strongest recent price momentum. Comparing the two clarifies how structural design—rather than sector label alone—shapes risk, return drivers, and relative positioning in the current environment.

First Trust Consumer Discretionary AlphaDEX Fund (FXD) Overview

FXD seeks to track the StrataQuant Consumer Discretionary Index, a smart-beta benchmark that selects stocks from the Russell 1000 Index using First Trust's AlphaDEX methodology. The approach ranks constituents on growth factors such as price appreciation and sales growth, alongside value factors including book value to price, cash flow to price, and return on assets. The fund holds approximately 119 positions and weights them using a modified equal-dollar scheme, which limits single-stock dominance and tilts exposure toward mid-cap names alongside large-caps.

Top holdings have recently included Dillard's (DDS), Gap (GAP), Fox (FOXA), SharkNinja (SN), Lyft (LYFT), Macy's (M), Mattel (MAT), Thor Industries (THO), Duolingo (DUOL), and Penske Automotive (PAG), with no single position exceeding roughly 2% of assets. Sector allocation is dominated by consumer discretionary, complemented by communication services and industrials. The fund carries a 0.60% net expense ratio and is reconstituted and rebalanced quarterly.

Invesco Dorsey Wright Consumer Cyclicals Momentum ETF (PEZ) Overview

PEZ tracks the Dorsey Wright Consumer Cyclicals Technical Leaders Index, a benchmark that identifies companies in the consumer discretionary and cyclicals universe showing powerful relative strength, or momentum. The fund typically holds between 30 and 40 securities selected and weighted on the basis of price momentum rather than fundamentals, and it is rebalanced and reconstituted quarterly. This design intentionally concentrates exposure in whatever names are currently exhibiting the strongest upward price trends.

Holdings shift with momentum conditions, and recent top positions have included Cardinal Health (CAH), Cheesecake Factory (CAKE), Marriott (MAR), Five Below (FIVE), Figs (FIGS), Hilton (HLT), Garmin (GRMN), Hasbro (HAS), eBay (EBAY), and Aramark (ARMK). Consumer discretionary is the largest sector weight, followed by communication services and industrials. PEZ reports a 0.60% net expense ratio but a higher gross fee, and its asset base and average daily trading volume are considerably smaller than FXD's.

Industry and Thematic Backdrop

Consumer discretionary performance remains tightly linked to the trajectory of inflation, wage growth, and interest-rate expectations, because durable goods, travel, and leisure spending are highly sensitive to financing costs and real household income. In recent market cycles, resilient employment and consumer balance sheets have supported spending on services and experiences, even as higher rates have pressured big-ticket, credit-sensitive purchases. Retail and automotive names—heavily represented in both funds—have also been shaped by inventory normalization, discounting pressures, and shifting e-commerce dynamics. The sector's cyclicality means that both ETFs carry elevated beta relative to the broader market, and their fortunes often hinge on the same macro catalysts even when their holdings differ.

Performance and Positioning Comparison

Over recent weeks and months, the two funds have exhibited distinct behavior tied to their construction. FXD's multi-factor, equal-weight approach tends to moderate single-stock volatility and produce more balanced participation across large- and mid-cap discretionary names. PEZ's momentum engine, by contrast, can amplify both upside and downside, concentrating gains in a smaller set of high-relative-strength stocks and reacting more sharply to trend reversals. In an environment of sector rotation and choppy consumer data, PEZ's concentration and higher turnover can introduce greater whipsaw risk, while FXD's broader, value-and-growth blend has tended to provide more stable relative positioning. Liquidity differences also matter: FXD's larger asset base and higher volume support tighter execution, whereas PEZ's thinner trading can widen effective costs for larger orders.

AI Screener

Tickeron's AI Screener is an AI-powered stock and ETF discovery tool that helps traders and investors filter the market using technical patterns, fundamentals, trend strength, volatility, and AI-driven signals. Users can scan thousands of securities with customizable filters covering industry, market capitalization, technical indicators, price patterns, and performance metrics, making it easier to surface trade ideas, trending names, and breakout candidates more efficiently than manual screening. Whether comparing sector funds or hunting for momentum setups, the AI Screener provides a structured way to narrow the opportunity set.

Tickeron AI Verdict

Based on observable structural factors, Tickeron's AI would likely favor FXD over PEZ in the current environment. FXD offers a materially broader, more diversified portfolio that reduces idiosyncratic single-stock risk, a more balanced blend of growth and value signals rather than pure momentum, and a comparable net cost with meaningfully deeper liquidity and a larger asset base. PEZ's concentrated relative-strength strategy can deliver strong returns during clean uptrends, but its higher turnover, smaller footprint, and heavier exposure to any single holding elevate drawdown and execution risk. On a risk-adjusted, structural basis, the AI would assign the higher probability of durable, well-diversified sector exposure to FXD, while acknowledging that PEZ may outperform during pronounced, uninterrupted momentum regimes.

Disclaimer

The information on this webpage is provided for general informational and educational purposes only and is not intended as investment advice, a recommendation to purchase or sell any security, or an offer or solicitation related to investments. It does not consider your personal financial situation, goals, or risk profile, and all investing carries inherent risks, including the possibility of losing your entire investment. For more details, please review our full disclaimer.

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