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

Zacks Equity Research
·4 min read

Launched on 04/19/2011, the First Trust Mid Cap Growth AlphaDEX ETF (FNY) is a passively managed exchange traded fund designed to provide a 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 $470.74 million, 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. These types of companies, then, have a good balance of stability and growth potential.

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. Further, growth stocks have a higher level of volatility associated with them. They are likely to outperform value stocks in strong bull markets but over the longer-term, value stocks have delivered better returns than growth stocks in almost all markets.

Costs

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 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 0.25%.

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 to the Information Technology sector--about 29.30% of the portfolio. Healthcare and Industrials round out the top three.

Looking at individual holdings, Enphase Energy, Inc. (ENPH) accounts for about 1% of total assets, followed by Inspire Medical Systems, Inc. (INSP) and Chewy, Inc. (class A) (CHWY).

The top 10 holdings account for about 8.57% 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 about 0% so far this year and is up roughly 36.92% in the last one year (as of 01/01/2021). In the past 52-week period, it has traded between $31.56 and $67.57.

The ETF has a beta of 1.17 and standard deviation of 25.81% 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 a great 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 Vanguard MidCap Growth ETF (VOT) and the iShares Russell MidCap Growth ETF (IWP) track a similar index. While Vanguard MidCap Growth ETF has $10.02 billion in assets, iShares Russell MidCap Growth ETF has $15.29 billion. VOT has an expense ratio of 0.07% and IWP charges 0.24%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also 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 Growth AlphaDEX ETF (FNY): ETF Research Reports
 
Enphase Energy, Inc. (ENPH) : Free Stock Analysis Report
 
iShares Russell MidCap Growth ETF (IWP): ETF Research Reports
 
Vanguard MidCap Growth ETF (VOT): ETF Research Reports
 
Inspire Medical Systems, Inc. (INSP) : Free Stock Analysis Report
 
Chewy Inc. (CHWY) : Free Stock Analysis Report
 
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Zacks Investment Research