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Should First Trust Mid Cap Value AlphaDEX ETF (FNK) Be on Your Investing Radar?

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Looking for broad exposure to the Mid Cap Value segment of the US equity market? You should consider the First Trust Mid Cap Value AlphaDEX ETF (FNK - Free Report) , a passively managed exchange traded fund launched on 04/19/2011.

The fund is sponsored by First Trust Advisors. It has amassed assets over $261.03 million, making it one of the average sized ETFs attempting to match the Mid Cap Value segment of the US equity market.

Why Mid Cap Value

Mid cap companies have market capitalization between $2 billion and $10 billion. They usually have higher growth prospects than large cap companies and are less volatile than small cap companies. These types of companies, then, have a good balance of stability and growth potential.

Value stocks have lower than average price-to-earnings and price-to-book ratios. They also have lower than average sales and earnings growth rates. Considering long-term performance, value stocks have outperformed growth stocks in almost all markets; however, they are more likely to underperform growth stocks in strong bull markets.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.70%, making it one of the most expensive products in the space.

It has a 12-month trailing dividend yield of 1.46%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Consumer Discretionary sector--about 22.90% of the portfolio. Financials and Industrials round out the top three.

Looking at individual holdings, Amkor Technology, Inc. (AMKR - Free Report) accounts for about 0.89% of total assets, followed by Thor Industries, Inc. (THO - Free Report) and Lci Industries (LCII - Free Report) .

The top 10 holdings account for about 8.01% of total assets under management.

Performance and Risk

FNK seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Value Index before fees and expenses. The NASDAQ AlphaDEX Mid Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 600 Mid Cap Value Index.

The ETF has added about 13.50% so far this year and was up about 8.02% in the last one year (as of 02/07/2023). In the past 52-week period, it has traded between $38.16 and $50.05.

The ETF has a beta of 1.29 and standard deviation of 34.21% for the trailing three-year period, making it a medium risk choice in the space. With about 226 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Mid Cap Value AlphaDEX ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FNK is a sufficient option for those seeking exposure to the Style Box - Mid Cap Value area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell Mid-Cap Value ETF (IWS - Free Report) and the Vanguard Mid-Cap Value ETF (VOE - Free Report) track a similar index. While iShares Russell Mid-Cap Value ETF has $13.63 billion in assets, Vanguard Mid-Cap Value ETF has $17.10 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

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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