If you're interested in broad exposure to the Mid Cap Value segment of the US equity market, look no further than the First Trust Mid Cap Value AlphaDEX ETF (FNK), a passively managed exchange traded fund launched on 04/19/2011.
The fund is sponsored by First Trust Advisors. It has amassed assets over $219.65 million, making it one of the average sized ETFs attempting to match the Mid Cap Value segment of the US equity market.
Why Mid Cap Value
Compared to large and small cap companies, mid cap businesses tend to have higher growth prospects and are less volatile, respectively, with market capitalization between $2 billion and $10 billion. Thus, companies that fall under this category provide a stable and growth-heavy investment.
While value stocks have lower than average price-to-earnings and price-to-book ratios, they also have lower than average sales and earnings growth rates. Looking at their long-term performance, value stocks have outperformed growth stocks in almost all markets. They are however likely to underperform growth stocks in strong bull markets.
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 one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 1.25%.
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 Financials sector--about 28.40% of the portfolio. Consumer Discretionary and Industrials round out the top three.
Looking at individual holdings, The Mosaic Company (NYSE:MOS) accounts for about 0.83% of total assets, followed by Iac/interactivecorp. (IAC) and Jefferies (NYSE:JEF) Financial Group Inc. (JEF).
The top 10 holdings account for about 7.91% of total assets under management.
Performance and Risk
FNK seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Value Index before fees and expenses. The NASDAQ AlphaDEX Mid Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 600 Mid Cap Value Index.
The ETF has added about 37.07% so far this year and was up about 41.66% in the last one year (as of 11/24/2021). In the past 52-week period, it has traded between $33.66 and $48.03.
The ETF has a beta of 1.41 and standard deviation of 32.39% 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 Value AlphaDEX ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FNK is an outstanding option for investors seeking exposure to the Style Box - Mid Cap Value segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares Russell MidCap Value ETF (IWS) and the Vanguard MidCap Value ETF (VOE) track a similar index. While iShares Russell MidCap Value ETF has $15.02 billion in assets, Vanguard MidCap Value ETF has $15.67 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.
Bottom-Line
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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.
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First Trust Mid Cap Value AlphaDEX ETF (FNK): ETF Research Reports
Jefferies Financial Group Inc. (JEF): Free Stock Analysis Report
The Mosaic Company (MOS): Free Stock Analysis Report
IACInterActiveCorp (IAC): Free Stock Analysis Report
Vanguard MidCap Value ETF (VOE): ETF Research Reports
iShares Russell MidCap Value ETF (IWS): ETF Research Reports
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