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An Actively Managed Growth Stock ETF Might Be Right Move After Recent Correction

By Investing.com (Tezcan Gecgil/Investing.com )ETFsMar 22, 2022 03:34AM ET
www.investing.com/analysis/an-actively-managed-growth-stock-etf-might-be-a-right-move-after-recent-correction-200620497
An Actively Managed Growth Stock ETF Might Be Right Move After Recent Correction
By Investing.com (Tezcan Gecgil/Investing.com )   |  Mar 22, 2022 03:34AM ET
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Wall Street shares have been under pressure for several months now, making investors nervous about the rest of the year's returns. So far in 2022, the S&P 500 is down roughly 6.4%, while the NASDAQ is down 11.5%. This trend implies a significant change from 2021's bull market.

However, last week was good for many stocks, especially growth names. As a result, investors have already started to add some of the most prominent exchange-traded funds (ETFs) that track the major US indices into long-term portfolios. They include:

  • SPDR® Dow Jones Industrial Average ETF Trust (NYSE:DIA), which tracks the Dow Jones;
  • SPDR® S&P 500 (NYSE:SPY), which tracks the S&P 500 index;
  • Invesco QQQ Trust (NASDAQ:QQQ), which tracks the NASDAQ 100.

For most retail investors, these funds would be among the first they'd buy after a correction. However, as we will show readers, there are many other appropriate options for this moment.

Therefore, today's article introduces an ETF that could appeal to those who believe that the positive sentiment in broader markets will continue to gain momentum in the weeks ahead.

American Century Focused Dynamic Growth ETF

  • Current Price: $69.91
  • 52-week range: $61.88-$89.96
  • Expense ratio: 0.45% per year

FDG Weekly Chart
FDG Weekly Chart

For growth share investors, 2021 was an excellent year. However, many high-profile growth stocks have seen wild swings during 2022's first quarter. As a result, there have been sizable pullbacks in some of the former darlings of Wall Street.

Some investors even wonder whether the investing landscape could morph into a bear market, wherein growth stocks do not perform strongly in the coming months. There is even talk of recessionary times ahead.

Other investors, however, see the recent decline in growth stocks as an excellent opportunity to buy the shares on the cheap. Today's featured fund, the American Century Focused Dynamic Growth ETF (NYSE:FDG), could appeal to those market participants in search of a relative bargain. It invests primarily in large- and mid-capitalization (cap) rapid-growth and profitable names with a competitive advantage.

These companies are also likely to be leaders in their sectors. The fund became available at the end of March 2020, and its net assets stand at $166.1 million.

FDG is an actively managed, non-transparent ETF (ANT). The US Securities and Exchange Commission (SEC) approved ANTs for the first time in November 2019. At the time, Commissioners Jackson and Lee remarked:

"Unlike other ETFs, these funds won't provide full daily transparency of exactly what's in their portfolios."

Most ETFs disclose their holdings daily. However, non-transparent ones disclose them only quarterly. Instead, they release a proxy portfolio.

As of Dec. 31, 2021, the top 10 stocks in FDG accounted for around half the portfolio, which invested in 37 stocks. Around a third of the businesses are information technology (IT) names in terms of sector allocation. Then come consumer discretionary companies (22%), communication services (14%), and healthcare (11%).

Leading holdings on the roster include Tesla (NASDAQ:TSLA); Amazon (NASDAQ:AMZN); Alphabet (NASDAQ:GOOGL); identity and access management company Okta (NASDAQ:OKTA); beverage group Constellation Brands (NYSE:STZ); Bill.Com Holdings (NYSE:BILL), which provides software for back-office operations; and payments technology giants Visa (NYSE:V) and Mastercard (NYSE:MA).

The ETF has declined 13.7% year-to-date in 2022 and 5% in the past 12 months. It saw a record high in November 2021. And the 52-week low came recently in mid-March. The fund's trailing P/E and P/B ratios stand at 48.05x and 13.54x.

We believe recent pullbacks in many of the fund's holdings have created suitable entry points into these robust names. Although volatility will likely continue in April, buy-and-hold investors could consider hitting the 'buy' button in FDG.

An Actively Managed Growth Stock ETF Might Be Right Move After Recent Correction
 

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An Actively Managed Growth Stock ETF Might Be Right Move After Recent Correction

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