Designed to provide broad exposure to the Mid Cap Growth segment of the US equity market, the First Trust Mid Cap Growth AlphaDEX Fund (FNY - Free Report) is a passively managed exchange traded fund launched on 04/19/2011.
The fund is sponsored by First Trust Advisors. It has amassed assets over $227.73 M, making it one of the average sized ETFs attempting to match the Mid Cap Growth segment of the US equity market.
Why Mid Cap Growth
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 they have a nice balance of growth potential and stability.
While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Further, growth stocks have a higher level of volatility associated with them. They are likely to outperform value stocks in strong bull markets but over the longer-term, value stocks have delivered better returns than growth stocks in almost all 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 0.12%.
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.
This ETF has heaviest allocation to the Information Technology sector--about 19.50% of the portfolio. Healthcare and Industrials round out the top three.
Looking at individual holdings, Tractor Supply Company (TSCO - Free Report) accounts for about 0.90% of total assets, followed by Amedisys, Inc. (AMED - Free Report) and Tetra Tech, Inc. (TTEK - Free Report) .
The top 10 holdings account for about 8.34% of total assets under management.
Performance and Risk
FNY seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Growth Index before fees and expenses. The NASDAQ AlphaDEX Mid Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 600 Mid Cap Growth Index.
The ETF has added about 0.19% so far this year and was up about 1.34% in the last one year (as of 11/28/2018). In the past 52-week period, it has traded between $38.16 and $47.12.
The ETF has a beta of 1.05 and standard deviation of 15.17% 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.
First Trust Mid Cap Growth AlphaDEX Fund holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FNY is a great option for investors seeking exposure to the Mid Cap ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares S&P Mid-Cap 400 Growth ETF (IJK - Free Report) and the iShares Russell Mid-Cap Growth ETF (IWP - Free Report) track a similar index. While iShares S&P Mid-Cap 400 Growth ETF has $7.26 B in assets, iShares Russell Mid-Cap Growth ETF has $8.46 B. IJK has an expense ratio of 0.25% and IWP charges 0.25%.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
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.