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Is First Trust Mid Cap Value AlphaDEX ETF (FNK) a Strong ETF Right Now?
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The First Trust Mid Cap Value AlphaDEX ETF (FNK - Free Report) made its debut on 04/19/2011, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Mid Cap Value 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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $223.78 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.
Operating expenses on an annual basis are 0.70% for FNK, making it one of the most expensive products in the space.
FNK's 12-month trailing dividend yield is 1.69%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
This ETF has heaviest allocation in the Financials sector - about 27.80% of the portfolio. Consumer Discretionary and Industrials round out the top three.
Looking at individual holdings, Xpo, Inc. (XPO - Free Report) accounts for about 1.04% of total assets, followed by American Equity Investment Life Holding Company and Louisiana-Pacific Corporation (LPX - Free Report) .
The top 10 holdings account for about 9.39% of total assets under management.
Performance and Risk
The ETF has gained about 8.05% so far this year and was up about 4.76% in the last one year (as of 08/24/2023). In the past 52-week period, it has traded between $38.16 and $50.05.
The fund has a beta of 1.31 and standard deviation of 23.28% for the trailing three-year period, which makes FNK a medium risk choice in this particular space. With about 227 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 $12.98 billion in assets, Vanguard Mid-Cap Value ETF has $15.77 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?
The First Trust Mid Cap Value AlphaDEX ETF (FNK - Free Report) made its debut on 04/19/2011, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Mid Cap Value 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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $223.78 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.
Operating expenses on an annual basis are 0.70% for FNK, making it one of the most expensive products in the space.
FNK's 12-month trailing dividend yield is 1.69%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
This ETF has heaviest allocation in the Financials sector - about 27.80% of the portfolio. Consumer Discretionary and Industrials round out the top three.
Looking at individual holdings, Xpo, Inc. (XPO - Free Report) accounts for about 1.04% of total assets, followed by American Equity Investment Life Holding Company and Louisiana-Pacific Corporation (LPX - Free Report) .
The top 10 holdings account for about 9.39% of total assets under management.
Performance and Risk
The ETF has gained about 8.05% so far this year and was up about 4.76% in the last one year (as of 08/24/2023). In the past 52-week period, it has traded between $38.16 and $50.05.
The fund has a beta of 1.31 and standard deviation of 23.28% for the trailing three-year period, which makes FNK a medium risk choice in this particular space. With about 227 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 $12.98 billion in assets, Vanguard Mid-Cap Value ETF has $15.77 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.