Launched on 04/19/2011, the First Trust Small Cap Growth AlphaDEX Fund (FYC - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Small Cap Growth segment of the US equity market.
The fund is sponsored by First Trust Advisors. It has amassed assets over $281.69 M, making it one of the average sized ETFs attempting to match the Small Cap Growth segment of the US equity market.
Why Small Cap Growth
With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.
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.
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.
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 0.04%.
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 Healthcare sector--about 20.30% of the portfolio. Information Technology and Industrials round out the top three.
Looking at individual holdings, Osi Systems, Inc. (OSIS - Free Report) accounts for about 0.84% of total assets, followed by Appfolio, Inc. (class A) (APPF - Free Report) and Avon Products, Inc. (AVP - Free Report) .
The top 10 holdings account for about 7.78% of total assets under management.
Performance and Risk
FYC seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index before fees and expenses. 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.
The ETF has gained about 12.34% so far this year and is down about -7.99% in the last one year (as of 06/11/2019). In the past 52-week period, it has traded between $37.33 and $53.13.
The ETF has a beta of 1.17 and standard deviation of 17.64% 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.
First Trust Small Cap Growth AlphaDEX Fund holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FYC is an excellent option for investors seeking exposure to the Style Box - Small Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.
The Vanguard Small-Cap Growth ETF (VBK - Free Report) and the iShares Russell 2000 Growth ETF (IWO - Free Report) track a similar index. While Vanguard Small-Cap Growth ETF has $8.84 B in assets, iShares Russell 2000 Growth ETF has $8.87 B. VBK has an expense ratio of 0.07% and IWO charges 0.24%.
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.