Markets

Should First Trust Mid Cap Growth AlphaDEX Fund (FNY) Be on Your Investing Radar?

If you're interested in broad exposure to the Mid Cap Growth segment of the US equity market, look no further than the First Trust Mid Cap Growth AlphaDEX Fund (FNY), a passively managed exchange traded fund launched on 04/19/2011.

The fund is sponsored by First Trust Advisors. It has amassed assets over $202.83 M, making it the smallest 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.

Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Further, growth stocks have a higher level of volatility associated with them. When you consider growth versus value, growth stocks are usually the clear winner in strong bull markets but tend to fall flat in nearly all other environments.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.70%, making it the most expensive products in the space.

It has a 12-month trailing dividend yield of 0.18%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. 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 20.50% of the portfolio. Healthcare and Industrials round out the top three.

Looking at individual holdings, Amedisys, Inc. (AMED) accounts for about 0.92% of total assets, followed by Twilio Inc. (class A) (TWLO) and Tractor Supply Company (TSCO).

The top 10 holdings account for about 8.49% 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 lost about -7.53% so far this year and is down about -7.77% in the last one year (as of 12/20/2018). In the past 52-week period, it has traded between $36.22 and $47.12.

The ETF has a beta of 1.05 and standard deviation of 15.59% 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.

Alternatives

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 an excellent option for investors seeking exposure to the Style Box - Mid Cap Growth 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) and the iShares Russell Mid-Cap Growth ETF (IWP) track a similar index. While iShares S&P Mid-Cap 400 Growth ETF has $6.69 B in assets, iShares Russell Mid-Cap Growth ETF has $8.39 B. IJK has an expense ratio of 0.25% and IWP charges 0.25%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

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 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

FT-MC GROWTH AD (FNY): ETF Research Reports

Twilio Inc. (TWLO): Free Stock Analysis Report

ISHARS-RS M GR (IWP): ETF Research Reports

Amedisys, Inc. (AMED): Free Stock Analysis Report

Tractor Supply Company (TSCO): Free Stock Analysis Report

ISHARS-SP MC GR (IJK): ETF Research Reports

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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.


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

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