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Is First Trust Mid Cap Value AlphaDEX ETF (FNK) a Strong ETF Right Now?

Launched on 04/19/2011, the First Trust Mid Cap Value AlphaDEX ETF (FNK) is a smart beta exchange traded fund offering broad exposure to the Style Box - Mid Cap Value 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.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

The fund is managed by First Trust Advisors, and has been able to amass over $219.65 million, which makes it one of the average sized ETFs in the Style Box - Mid Cap Value. FNK, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Value Index.

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.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for FNK are 0.70%, which makes it one of the most expensive products in the space.

It's 12-month trailing dividend yield comes in at 1.25%.

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 in the Financials sector - about 28.40% of the portfolio. Consumer Discretionary and Industrials round out the top three.

Taking into account individual holdings, The Mosaic Company (MOS) accounts for about 0.83% of the fund's total assets, followed by Iac/interactivecorp. (IAC) and Jefferies Financial Group Inc. (JEF).

FNK's top 10 holdings account for about 7.91% of its total assets under management.

Performance and Risk

The ETF has gained about 37.07% so far this year and is 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 is an excellent option for investors seeking to outperform the Style Box - Mid Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.

IShares Russell MidCap Value ETF (IWS) tracks Russell MidCap Value Index and the Vanguard MidCap Value ETF (VOE) tracks CRSP U.S. Mid Cap Value Index. 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%.

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 Value.

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 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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