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Is First Trust Mid Cap Value AlphaDEX ETF (FNK) a Strong ETF Right Now?
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Designed to provide broad exposure to the Style Box - Mid Cap Value category of the market, the First Trust Mid Cap Value AlphaDEX ETF (FNK - Free Report) is a smart beta exchange traded fund launched on 04/19/2011.
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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
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 $253.82 million, which makes it one of the smaller 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With one of the most expensive products in the space, this ETF has annual operating expenses of 0.70%.
It has a 12-month trailing dividend yield of 1.72%.
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.
FNK's heaviest allocation is in the Consumer Discretionary sector, which is about 23.10% of the portfolio. Its Financials and Industrials round out the top three.
Taking into account individual holdings, Amkor Technology, Inc. (AMKR - Free Report) accounts for about 0.89% of the fund's 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
So far this year, FNK return is roughly 0.39%, and is down about -3.57% in the last one year (as of 04/13/2023). During this past 52-week period, the fund has traded between $38.16 and $50.05.
The ETF has a beta of 1.29 and standard deviation of 28.58% 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 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 Mid-Cap Value ETF (IWS - Free Report) tracks Russell MidCap Value Index and the Vanguard Mid-Cap Value ETF (VOE - Free Report) tracks CRSP U.S. Mid Cap Value Index. IShares Russell Mid-Cap Value ETF has $12.63 billion in assets, Vanguard Mid-Cap Value ETF has $15.73 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?
Designed to provide broad exposure to the Style Box - Mid Cap Value category of the market, the First Trust Mid Cap Value AlphaDEX ETF (FNK - Free Report) is a smart beta exchange traded fund launched on 04/19/2011.
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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
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 $253.82 million, which makes it one of the smaller 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With one of the most expensive products in the space, this ETF has annual operating expenses of 0.70%.
It has a 12-month trailing dividend yield of 1.72%.
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.
FNK's heaviest allocation is in the Consumer Discretionary sector, which is about 23.10% of the portfolio. Its Financials and Industrials round out the top three.
Taking into account individual holdings, Amkor Technology, Inc. (AMKR - Free Report) accounts for about 0.89% of the fund's 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
So far this year, FNK return is roughly 0.39%, and is down about -3.57% in the last one year (as of 04/13/2023). During this past 52-week period, the fund has traded between $38.16 and $50.05.
The ETF has a beta of 1.29 and standard deviation of 28.58% 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 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 Mid-Cap Value ETF (IWS - Free Report) tracks Russell MidCap Value Index and the Vanguard Mid-Cap Value ETF (VOE - Free Report) tracks CRSP U.S. Mid Cap Value Index. IShares Russell Mid-Cap Value ETF has $12.63 billion in assets, Vanguard Mid-Cap Value ETF has $15.73 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.