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Is First Trust Small Cap Growth AlphaDEX ETF (FYC) a Strong ETF Right Now?
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A smart beta exchange traded fund, the First Trust Small Cap Growth AlphaDEX ETF (FYC - Free Report) debuted on 04/19/2011, and offers broad exposure to the Style Box - Small Cap Growth category of the market.
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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $202.45 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Growth. Before fees and expenses, FYC seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index.
The NASDAQ AlphaDEX Small Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Growth Index.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.70%, making it one of the more expensive products in the space.
It's 12-month trailing dividend yield comes in at 0.80%.
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.
This ETF has heaviest allocation in the Information Technology sector - about 16.80% of the portfolio. Healthcare and Consumer Discretionary round out the top three.
Looking at individual holdings, Lantheus Holdings, Inc. (LNTH - Free Report) accounts for about 1.07% of total assets, followed by Matador Resources Company (MTDR - Free Report) and Pdc Energy, Inc. .
Its top 10 holdings account for approximately 9.14% of FYC's total assets under management.
Performance and Risk
The ETF has lost about -21.99% so far this year and is down about -15.97% in the last one year (as of 05/27/2022). In the past 52-week period, it has traded between $54.37 and $80.47.
The fund has a beta of 1.22 and standard deviation of 31.63% for the trailing three-year period, which makes FYC a high risk choice in this particular space. With about 263 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Growth AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 2000 Growth ETF (IWO - Free Report) tracks Russell 2000 Growth Index and the Vanguard SmallCap Growth ETF (VBK - Free Report) tracks CRSP U.S. Small Cap Growth Index. IShares Russell 2000 Growth ETF has $9.14 billion in assets, Vanguard SmallCap Growth ETF has $12.28 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.
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 - Small 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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Is First Trust Small Cap Growth AlphaDEX ETF (FYC) a Strong ETF Right Now?
A smart beta exchange traded fund, the First Trust Small Cap Growth AlphaDEX ETF (FYC - Free Report) debuted on 04/19/2011, and offers broad exposure to the Style Box - Small Cap Growth category of the market.
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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $202.45 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Growth. Before fees and expenses, FYC seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index.
The NASDAQ AlphaDEX Small Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Growth Index.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.70%, making it one of the more expensive products in the space.
It's 12-month trailing dividend yield comes in at 0.80%.
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.
This ETF has heaviest allocation in the Information Technology sector - about 16.80% of the portfolio. Healthcare and Consumer Discretionary round out the top three.
Looking at individual holdings, Lantheus Holdings, Inc. (LNTH - Free Report) accounts for about 1.07% of total assets, followed by Matador Resources Company (MTDR - Free Report) and Pdc Energy, Inc. .
Its top 10 holdings account for approximately 9.14% of FYC's total assets under management.
Performance and Risk
The ETF has lost about -21.99% so far this year and is down about -15.97% in the last one year (as of 05/27/2022). In the past 52-week period, it has traded between $54.37 and $80.47.
The fund has a beta of 1.22 and standard deviation of 31.63% for the trailing three-year period, which makes FYC a high risk choice in this particular space. With about 263 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Growth AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 2000 Growth ETF (IWO - Free Report) tracks Russell 2000 Growth Index and the Vanguard SmallCap Growth ETF (VBK - Free Report) tracks CRSP U.S. Small Cap Growth Index. IShares Russell 2000 Growth ETF has $9.14 billion in assets, Vanguard SmallCap Growth ETF has $12.28 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.
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 - Small 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.