Is First Trust Mid Cap Core AlphaDEX ETF (FNX) a Strong ETF Right Now?
A smart beta exchange traded fund, the First Trust Mid Cap Core AlphaDEX ETF (FNX) debuted on 05/08/2007, and offers broad exposure to the Style Box - Mid Cap Blend category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
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.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
FNX is managed by First Trust Advisors, and this fund has amassed over $1.07 billion, which makes it one of the average sized ETFs in the Style Box - Mid Cap Blend. Before fees and expenses, FNX seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Core Index.
The NASDAQ AlphaDEX Mid Cap Core Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 600 Mid Cap Index.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.60% for FNX, making it one of the more expensive products in the space.
FNX's 12-month trailing dividend yield is 0.86%.
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.
This ETF has heaviest allocation in the Financials sector - about 21.60% of the portfolio. Industrials and Consumer Discretionary round out the top three.
Taking into account individual holdings, Avis Budget Group, Inc. (CAR) accounts for about 0.48% of the fund's total assets, followed by Apa Corporation (APA) and Ovintiv Inc. (OVV).
Its top 10 holdings account for approximately 4.21% of FNX's total assets under management.
Performance and Risk
The ETF return is roughly 27.10% and is up about 47.35% so far this year and in the past one year (as of 10/25/2021), respectively. FNX has traded between $67.28 and $103.55 during this last 52-week period.
The fund has a beta of 1.29 and standard deviation of 28.32% for the trailing three-year period, which makes FNX a medium risk choice in this particular space. With about 452 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Mid Cap Core AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Mid Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard MidCap ETF (VO) tracks CRSP US Mid Cap Index and the iShares Core S&P MidCap ETF (IJH) tracks S&P MidCap 400 Index. Vanguard MidCap ETF has $54.65 billion in assets, iShares Core S&P MidCap ETF has $65.96 billion. VO has an expense ratio of 0.04% and IJH charges 0.05%.
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 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.
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First Trust Mid Cap Core AlphaDEX ETF (FNX): ETF Research Reports
Avis Budget Group, Inc. (CAR) : Free Stock Analysis Report
APA Corporation (APA) : Free Stock Analysis Report
iShares Core S&P MidCap ETF (IJH): ETF Research Reports
Vanguard MidCap ETF (VO): ETF Research Reports
Ovintiv Inc. (OVV) : Free Stock Analysis Report
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