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Is First Trust Mid Cap Growth AlphaDEX ETF (FNY) a Strong ETF Right Now?

Smart Beta ETF report for FNY

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This story originally appeared on Zacks

Designed to provide broad exposure to the Style Box - Mid Cap Growth category of the market, the First Trust Mid Cap Growth AlphaDEX ETF (FNY) is a smart beta exchange traded fund launched on 04/19/2011.

- Zacks

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

Because the fund has amassed over $450.60 million, this makes it one of the average sized ETFs in the Style Box - Mid Cap Growth. FNY is managed by First Trust Advisors. FNY seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Growth Index before fees and expenses.

The NASDAQ AlphaDEX Mid Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 600 Mid Cap Growth Index.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Operating expenses on an annual basis are 0.70% for this ETF, which makes it one of the most expensive products in the space.

It has a 12-month trailing dividend yield of 0%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

FNY's heaviest allocation is in the Healthcare sector, which is about 19% of the portfolio. Its Information Technology and Industrials round out the top three.

When you look at individual holdings, Avis Budget Group, Inc. (CAR) accounts for about 0.98% of the fund's total assets, followed by Apa Corporation (APA) and Exp World Holdings, Inc. (EXPI).

Its top 10 holdings account for approximately 8.55% of FNY's total assets under management.

Performance and Risk

Year-to-date, the First Trust Mid Cap Growth AlphaDEX ETF has gained about 15.20% so far, and was up about 10.98% over the last 12 months (as of 12/28/2021). FNY has traded between $64.40 and $79.63 in this past 52-week period.

FNY has a beta of 1.11 and standard deviation of 26.05% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 227 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Mid Cap Growth AlphaDEX ETF is an excellent option for investors seeking to outperform the Style Box - Mid Cap Growth segment of the market. There are other ETFs in the space which investors could consider as well.

Vanguard MidCap Growth ETF (VOT) tracks CRSP U.S. Mid Cap Growth Index and the iShares Russell MidCap Growth ETF (IWP) tracks Russell MidCap Growth Index. Vanguard MidCap Growth ETF has $12.69 billion in assets, iShares Russell MidCap Growth ETF has $16.29 billion. VOT has an expense ratio of 0.07% and IWP charges 0.23%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Mid Cap Growth.

Bottom Line

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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First Trust Mid Cap Growth AlphaDEX ETF (FNY): ETF Research Reports

 

Avis Budget Group, Inc. (CAR): Free Stock Analysis Report

 

APA Corporation (APA): Free Stock Analysis Report

 

iShares Russell MidCap Growth ETF (IWP): ETF Research Reports

 

Vanguard MidCap Growth ETF (VOT): ETF Research Reports

 

Exp World Holdings, Inc. (EXPI): Free Stock Analysis Report

 

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