Should First Trust Mid Cap Growth AlphaDEX ETF (FNY) Be On Your Investing Radar?

The First Trust Mid Cap Growth AlphaDEX ETF (FNY) was launched on 04/19/2011, and is a passively managed exchange traded fund designed to offer broad exposure to the Mid Cap Growth segment of the US equity market.

The fund is sponsored by First Trust Advisors. It has amassed assets over $333.17 M, making it one of the smaller 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, companies that fall under this category provide a stable and growth-heavy investment.

Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. Additionally, growth stocks have a greater level of risk 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 0.26%.

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 to the Information Technology sector--about 18.10% of the portfolio. Industrials and Healthcare round out the top three.

Looking at individual holdings, Arrowhead Pharmaceuticals, Inc. (ARWR) accounts for about 1.55% of total assets, followed by Carvana Co. (CVNA) and The Medicines Company (MDCO).

The top 10 holdings account for about 9.45% 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 added roughly 4.66% so far this year and is up about 20.06% in the last one year (as of 02/07/2020). In the past 52-week period, it has traded between $41.70 and $50.10.

The ETF has a beta of 1.09 and standard deviation of 16.80% for the trailing three-year period, making it a medium risk choice in the space. With about 226 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Mid Cap Growth AlphaDEX ETF 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 outstanding 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 $7.56 B in assets, iShares Russell Mid-Cap Growth ETF has $12.08 B. IJK has an expense ratio of 0.24% and IWP charges 0.24%.

Bottom-Line

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.