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Is First Trust Mid Cap Value AlphaDEX ETF (FNK) a Strong ETF Right Now?
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A smart beta exchange traded fund, the First Trust Mid Cap Value AlphaDEX ETF (FNK - Free Report) debuted on 04/19/2011, and offers broad exposure to the Style Box - Mid Cap Value category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
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, FNK has amassed assets over $220.90 million, making it one of the average sized ETFs in the Style Box - Mid Cap Value. 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.
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.
With one of the most expensive products in the space, this ETF has annual operating expenses of 0.70%.
FNK's 12-month trailing dividend yield is 1.57%.
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.
This ETF has heaviest allocation in the Financials sector - about 28.70% of the portfolio. Industrials and Consumer Discretionary round out the top three.
Taking into account individual holdings, Penske Automotive Group, Inc. (PAG - Free Report) accounts for about 0.99% of the fund's total assets, followed by Autonation, Inc. (AN - Free Report) and Ugi Corporation (UGI - Free Report) .
Its top 10 holdings account for approximately 8.81% of FNK's total assets under management.
Performance and Risk
The ETF has lost about -6.13% so far this year and is up roughly 1.39% in the last one year (as of 08/05/2022). In the past 52-week period, it has traded between $39.47 and $48.46.
The ETF has a beta of 1.28 and standard deviation of 33.28% for the trailing three-year period, making it a medium risk choice in the space. With about 225 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Mid Cap Value AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Mid Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell MidCap Value ETF (IWS - Free Report) tracks Russell MidCap Value Index and the Vanguard MidCap Value ETF (VOE - Free Report) tracks CRSP U.S. Mid Cap Value Index. IShares Russell MidCap Value ETF has $13.34 billion in assets, Vanguard MidCap Value ETF has $15.79 billion. IWS has an expense ratio of 0.23% and VOE 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 - Mid Cap Value.
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 Value AlphaDEX ETF (FNK) a Strong ETF Right Now?
A smart beta exchange traded fund, the First Trust Mid Cap Value AlphaDEX ETF (FNK - Free Report) debuted on 04/19/2011, and offers broad exposure to the Style Box - Mid Cap Value category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
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, FNK has amassed assets over $220.90 million, making it one of the average sized ETFs in the Style Box - Mid Cap Value. 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.
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.
With one of the most expensive products in the space, this ETF has annual operating expenses of 0.70%.
FNK's 12-month trailing dividend yield is 1.57%.
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.
This ETF has heaviest allocation in the Financials sector - about 28.70% of the portfolio. Industrials and Consumer Discretionary round out the top three.
Taking into account individual holdings, Penske Automotive Group, Inc. (PAG - Free Report) accounts for about 0.99% of the fund's total assets, followed by Autonation, Inc. (AN - Free Report) and Ugi Corporation (UGI - Free Report) .
Its top 10 holdings account for approximately 8.81% of FNK's total assets under management.
Performance and Risk
The ETF has lost about -6.13% so far this year and is up roughly 1.39% in the last one year (as of 08/05/2022). In the past 52-week period, it has traded between $39.47 and $48.46.
The ETF has a beta of 1.28 and standard deviation of 33.28% for the trailing three-year period, making it a medium risk choice in the space. With about 225 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Mid Cap Value AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Mid Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell MidCap Value ETF (IWS - Free Report) tracks Russell MidCap Value Index and the Vanguard MidCap Value ETF (VOE - Free Report) tracks CRSP U.S. Mid Cap Value Index. IShares Russell MidCap Value ETF has $13.34 billion in assets, Vanguard MidCap Value ETF has $15.79 billion. IWS has an expense ratio of 0.23% and VOE 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 - Mid Cap Value.
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.