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Is First Trust Small Cap Growth AlphaDEX ETF (FYC) a Strong ETF Right Now?
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Making its debut on 04/19/2011, smart beta exchange traded fund First Trust Small Cap Growth AlphaDEX ETF (FYC - Free Report) provides investors broad exposure to the Style Box - Small Cap Growth category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the 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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
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
The fund is managed by First Trust Advisors, and has been able to amass over $216.90 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Growth. This particular fund, before fees and expenses, 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
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.
Operating expenses on an annual basis are 0.71% for FYC, making it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 0.22%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For FYC, it has heaviest allocation in the Information Technology sector --about 19.70% of the portfolio --while Industrials and Energy round out the top three.
Taking into account individual holdings, Axcelis Technologies, Inc. (ACLS - Free Report) accounts for about 1.03% of the fund's total assets, followed by Hims & Hers Health, Inc. (HIMS - Free Report) and E.l.f. Beauty, Inc. (ELF - Free Report) .
The top 10 holdings account for about 8.47% of total assets under management.
Performance and Risk
Year-to-date, the First Trust Small Cap Growth AlphaDEX ETF return is roughly 9.35% so far, and is up about 10.53% over the last 12 months (as of 07/04/2023). FYC has traded between $53.15 and $64.80 in this past 52-week period.
The ETF has a beta of 1.19 and standard deviation of 25.74% for the trailing three-year period, making it a high risk choice in the space. With about 264 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Growth AlphaDEX ETF is an excellent option for investors seeking to outperform the Style Box - Small Cap Growth segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell 2000 Growth ETF (IWO - Free Report) tracks Russell 2000 Growth Index and the Vanguard Small-Cap Growth ETF (VBK - Free Report) tracks CRSP U.S. Small Cap Growth Index. IShares Russell 2000 Growth ETF has $10.07 billion in assets, Vanguard Small-Cap Growth ETF has $14.10 billion. IWO has an expense ratio of 0.23% 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?
Making its debut on 04/19/2011, smart beta exchange traded fund First Trust Small Cap Growth AlphaDEX ETF (FYC - Free Report) provides investors broad exposure to the Style Box - Small Cap Growth category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the 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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
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
The fund is managed by First Trust Advisors, and has been able to amass over $216.90 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Growth. This particular fund, before fees and expenses, 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
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.
Operating expenses on an annual basis are 0.71% for FYC, making it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 0.22%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For FYC, it has heaviest allocation in the Information Technology sector --about 19.70% of the portfolio --while Industrials and Energy round out the top three.
Taking into account individual holdings, Axcelis Technologies, Inc. (ACLS - Free Report) accounts for about 1.03% of the fund's total assets, followed by Hims & Hers Health, Inc. (HIMS - Free Report) and E.l.f. Beauty, Inc. (ELF - Free Report) .
The top 10 holdings account for about 8.47% of total assets under management.
Performance and Risk
Year-to-date, the First Trust Small Cap Growth AlphaDEX ETF return is roughly 9.35% so far, and is up about 10.53% over the last 12 months (as of 07/04/2023). FYC has traded between $53.15 and $64.80 in this past 52-week period.
The ETF has a beta of 1.19 and standard deviation of 25.74% for the trailing three-year period, making it a high risk choice in the space. With about 264 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Growth AlphaDEX ETF is an excellent option for investors seeking to outperform the Style Box - Small Cap Growth segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell 2000 Growth ETF (IWO - Free Report) tracks Russell 2000 Growth Index and the Vanguard Small-Cap Growth ETF (VBK - Free Report) tracks CRSP U.S. Small Cap Growth Index. IShares Russell 2000 Growth ETF has $10.07 billion in assets, Vanguard Small-Cap Growth ETF has $14.10 billion. IWO has an expense ratio of 0.23% 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.