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Is First Trust Small Cap Growth AlphaDEX Fund (FYC) a Hot 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 Fund (FYC - Free Report) provides investors broad exposure to the Small Cap ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
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.
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
FYC is managed by First Trust Advisors, and this fund has amassed over $408.85 M, which makes it one of the average sized ETFs in the Small Cap ETFs. Before fees and expenses, this particular fund 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.70% for FYC, making it one of the most expensive products in the space.
It's 12-month trailing dividend yield comes in at 0.15%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Healthcare sector - about 27.90% of the portfolio. Industrials and Information Technology round out the top three.
Taking into account individual holdings, Endo International Plc (ENDP) accounts for about 0.78% of the fund's total assets, followed by Freshpet, Inc. (FRPT) and The Ensign Group, Inc. (ENSG).
The top 10 holdings account for about 7.21% of total assets under management.
Performance and Risk
The ETF has added roughly 9.35% and it's up approximately 12.53% so far this year and in the past one year (as of 11/06/2018), respectively. FYC has traded between $40.47 and $53.13 during this last 52-week period.
The ETF has a beta of 1.16 and standard deviation of 16.72% for the trailing three-year period, making it a high risk choice in the space. With about 262 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Growth AlphaDEX Fund is an excellent option for investors seeking to outperform the Small Cap ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Vanguard Small-Cap Growth ETF (VBK) tracks CRSP U.S. Small Cap Growth Index and the iShares Russell 2000 Growth ETF (IWO) tracks Russell 2000 Growth Index. Vanguard Small-Cap Growth ETF has $8.13 B in assets, iShares Russell 2000 Growth ETF has $9.48 B. VBK has an expense ratio of 0.07% and IWO charges 0.24%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Small Cap ETFs.
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 Fund (FYC) a Hot ETF Right Now?
Making its debut on 04/19/2011, smart beta exchange traded fund First Trust Small Cap Growth AlphaDEX Fund (FYC - Free Report) provides investors broad exposure to the Small Cap ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
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.
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
FYC is managed by First Trust Advisors, and this fund has amassed over $408.85 M, which makes it one of the average sized ETFs in the Small Cap ETFs. Before fees and expenses, this particular fund 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.70% for FYC, making it one of the most expensive products in the space.
It's 12-month trailing dividend yield comes in at 0.15%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Healthcare sector - about 27.90% of the portfolio. Industrials and Information Technology round out the top three.
Taking into account individual holdings, Endo International Plc (ENDP) accounts for about 0.78% of the fund's total assets, followed by Freshpet, Inc. (FRPT) and The Ensign Group, Inc. (ENSG).
The top 10 holdings account for about 7.21% of total assets under management.
Performance and Risk
The ETF has added roughly 9.35% and it's up approximately 12.53% so far this year and in the past one year (as of 11/06/2018), respectively. FYC has traded between $40.47 and $53.13 during this last 52-week period.
The ETF has a beta of 1.16 and standard deviation of 16.72% for the trailing three-year period, making it a high risk choice in the space. With about 262 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Growth AlphaDEX Fund is an excellent option for investors seeking to outperform the Small Cap ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Vanguard Small-Cap Growth ETF (VBK) tracks CRSP U.S. Small Cap Growth Index and the iShares Russell 2000 Growth ETF (IWO) tracks Russell 2000 Growth Index. Vanguard Small-Cap Growth ETF has $8.13 B in assets, iShares Russell 2000 Growth ETF has $9.48 B. VBK has an expense ratio of 0.07% and IWO charges 0.24%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Small Cap ETFs.
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.