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Is First Trust Mid Cap Core AlphaDEX ETF (FNX) a Strong ETF Right Now?
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A smart beta exchange traded fund, the First Trust Mid Cap Core AlphaDEX ETF (FNX - Free Report) debuted on 05/08/2007, and offers broad exposure to the Style Box - Mid Cap Blend category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: 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.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Managed by First Trust Advisors, FNX has amassed assets over $941.38 million, making it one of the average sized ETFs in the Style Box - Mid Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Core Index.
The NASDAQ AlphaDEX Mid Cap Core Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 600 Mid Cap Index.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.59%, making it one of the more expensive products in the space.
FNX's 12-month trailing dividend yield is 1.23%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For FNX, it has heaviest allocation in the Financials sector --about 19.10% of the portfolio --while Industrials and Consumer Discretionary round out the top three.
When you look at individual holdings, The Goodyear Tire & Rubber Company (GT - Free Report) accounts for about 0.47% of the fund's total assets, followed by Dillard's, Inc. (class A) (DDS - Free Report) and United States Steel Corporation (X - Free Report) .
The top 10 holdings account for about 4.34% of total assets under management.
Performance and Risk
The ETF has lost about -14.87% and is down about -16.54% so far this year and in the past one year (as of 11/07/2022), respectively. FNX has traded between $80.01 and $107.11 during this last 52-week period.
FNX has a beta of 1.20 and standard deviation of 29.89% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 451 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Mid Cap Core AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Mid Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard MidCap ETF (VO - Free Report) tracks CRSP US Mid Cap Index and the iShares Core S&P MidCap ETF (IJH - Free Report) tracks S&P MidCap 400 Index. Vanguard MidCap ETF has $48.43 billion in assets, iShares Core S&P MidCap ETF has $61.68 billion. VO has an expense ratio of 0.04% and IJH charges 0.05%.
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 Blend.
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 Mid Cap Core AlphaDEX ETF (FNX) a Strong ETF Right Now?
A smart beta exchange traded fund, the First Trust Mid Cap Core AlphaDEX ETF (FNX - Free Report) debuted on 05/08/2007, and offers broad exposure to the Style Box - Mid Cap Blend category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: 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.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Managed by First Trust Advisors, FNX has amassed assets over $941.38 million, making it one of the average sized ETFs in the Style Box - Mid Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Core Index.
The NASDAQ AlphaDEX Mid Cap Core Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 600 Mid Cap Index.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.59%, making it one of the more expensive products in the space.
FNX's 12-month trailing dividend yield is 1.23%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For FNX, it has heaviest allocation in the Financials sector --about 19.10% of the portfolio --while Industrials and Consumer Discretionary round out the top three.
When you look at individual holdings, The Goodyear Tire & Rubber Company (GT - Free Report) accounts for about 0.47% of the fund's total assets, followed by Dillard's, Inc. (class A) (DDS - Free Report) and United States Steel Corporation (X - Free Report) .
The top 10 holdings account for about 4.34% of total assets under management.
Performance and Risk
The ETF has lost about -14.87% and is down about -16.54% so far this year and in the past one year (as of 11/07/2022), respectively. FNX has traded between $80.01 and $107.11 during this last 52-week period.
FNX has a beta of 1.20 and standard deviation of 29.89% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 451 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Mid Cap Core AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Mid Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard MidCap ETF (VO - Free Report) tracks CRSP US Mid Cap Index and the iShares Core S&P MidCap ETF (IJH - Free Report) tracks S&P MidCap 400 Index. Vanguard MidCap ETF has $48.43 billion in assets, iShares Core S&P MidCap ETF has $61.68 billion. VO has an expense ratio of 0.04% and IJH charges 0.05%.
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 Blend.
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.