Is First Trust Small Cap Core AlphaDEX ETF (FYX) a Strong ETF Right Now?

Making its debut on 05/08/2007, smart beta exchange traded fund First Trust Small Cap Core AlphaDEX ETF (FYX) provides investors broad exposure to the Style Box - Small Cap Blend 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.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

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.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

Because the fund has amassed over $836.01 million, this makes it one of the average sized ETFs in the Style Box - Small Cap Blend. FYX is managed by First Trust Advisors. This particular fund seeks to match the performance of the Nasdaq AlphaDEX Small Cap Core Index before fees and expenses.

The NASDAQ AlphaDEX Small Cap Core Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Index.

Cost & Other Expenses

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.

Operating expenses on an annual basis are 0.60% for this ETF, which makes it one of the more expensive products in the space.

FYX's 12-month trailing dividend yield is 1.17%.

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.

For FYX, it has heaviest allocation in the Financials sector --about 23.20% of the portfolio --while Industrials and Consumer Discretionary round out the top three.

Looking at individual holdings, Oscar Health, Inc. (class A) (OSCR) accounts for about 0.49% of total assets, followed by Modine Manufacturing Company (MOD) and Sphere Entertainment Co. (SPHR).

FYX's top 10 holdings account for about 4.32% of its total assets under management.

Performance and Risk

So far this year, FYX has lost about -4.35%, and was up about 11.50% in the last one year (as of 04/16/2024). During this past 52-week period, the fund has traded between $74.82 and $93.24.

The fund has a beta of 1.25 and standard deviation of 22.39% for the trailing three-year period, which makes FYX a medium risk choice in this particular space. With about 526 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Small Cap Core AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell 2000 ETF (IWM) tracks Russell 2000 Index and the iShares Core S&P Small-Cap ETF (IJR) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $59.98 billion in assets, iShares Core S&P Small-Cap ETF has $75.43 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

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 - Small Cap Blend.

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.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.

Get it free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

First Trust Small Cap Core AlphaDEX ETF (FYX): ETF Research Reports

iShares Russell 2000 ETF (IWM): ETF Research Reports

Modine Manufacturing Company (MOD) : Free Stock Analysis Report

iShares Core S&P Small-Cap ETF (IJR): ETF Research Reports

Oscar Health, Inc. (OSCR) : Free Stock Analysis Report

Sphere Entertainment Co. (SPHR) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Tags

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.