Is First Trust Mid Cap Value AlphaDEX ETF (FNK) a Strong ETF Right Now?
The First Trust Mid Cap Value AlphaDEX ETF (FNK) was launched on 04/19/2011, and is a smart beta exchange traded fund designed to offer 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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $213.23 million, making 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
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.
With the most expensive product in the space, this ETF has annual operating expenses of 0.70%.
It has a 12-month trailing dividend yield of 1.71%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
FNK's heaviest allocation is in the Financials sector, which is about 24.80% of the portfolio. Its Consumer Discretionary and Industrials round out the top three.
When you look at individual holdings, Matson, Inc. (MATX) accounts for about 0.93% of the fund's total assets, followed by United Therapeutics Corporation (UTHR) and Avnet, Inc. (AVT).
Its top 10 holdings account for approximately 8.2% of FNK's total assets under management.
Performance and Risk
The ETF has added roughly 2.62% and is up about 9.73% so far this year and in the past one year (as of 08/14/2024), respectively. FNK has traded between $41.67 and $55.68 during this last 52-week period.
The fund has a beta of 1.27 and standard deviation of 21.85% for the trailing three-year period, which makes FNK a medium risk choice in this particular space. With about 224 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) tracks Russell MidCap Value Index and the Vanguard Mid-Cap Value ETF (VOE) tracks CRSP U.S. Mid Cap Value Index. IShares Russell Mid-Cap Value ETF has $12.85 billion in assets, Vanguard Mid-Cap Value ETF has $16.54 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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Get it free >>First Trust Mid Cap Value AlphaDEX ETF (FNK): ETF Research Reports
Avnet, Inc. (AVT) : Free Stock Analysis Report
United Therapeutics Corporation (UTHR) : Free Stock Analysis Report
Matson, Inc. (MATX) : Free Stock Analysis Report
Vanguard Mid-Cap Value ETF (VOE): ETF Research Reports
iShares Russell Mid-Cap Value ETF (IWS): ETF Research Reports
