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 Quick Quote 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 $208.04 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. Thus, companies that fall under this category provide a stable and growth-heavy investment.
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.
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
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 1.79%.
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 to the Financials sector--about 31% of the portfolio. Consumer Discretionary and Industrials round out the top three.
Looking at individual holdings, Western Alliance Bancorporation (
WAL Quick Quote WAL - Free Report) accounts for about 1% of total assets, followed by Sm Energy Company ( SM Quick Quote SM - Free Report) and Hf Sinclair Corp. ( DINO Quick Quote DINO - Free Report) .
The top 10 holdings account for about 8.96% 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 return is roughly 6.49% so far this year and is up about 3.60% in the last one year (as of 11/15/2023). In the past 52-week period, it has traded between $40.99 and $50.05.
The ETF has a beta of 1.31 and standard deviation of 22.21% 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.
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 good 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 Quick Quote IWS - Free Report) and the Vanguard Mid-Cap Value ETF ( VOE Quick Quote VOE - Free Report) track a similar index. While iShares Russell Mid-Cap Value ETF has $11.94 billion in assets, Vanguard Mid-Cap Value ETF has $15.20 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%. Bottom-Line
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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.