If you're interested in broad exposure to the Mid Cap Growth segment of the US equity market, look no further than the First Trust Mid Cap Growth AlphaDEX Fund (FNY), a passively managed exchange traded fund launched on 04/19/2011.
The fund is sponsored by First Trust Advisors. It has amassed assets over $303.46 M, making it the smallest 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.
While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
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 0.04%.
Sector Exposure and Top Holdings
ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Information Technology sector--about 24.90% of the portfolio. Industrials and Healthcare round out the top three.
Looking at individual holdings, Avalara, Inc. (AVLR) accounts for about 0.83% of total assets, followed by Roku, Inc. (ROKU) and Epam Systems, Inc. (EPAM).
The top 10 holdings account for about 7.93% 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 27.91% so far this year and was up about 2.41% in the last one year (as of 07/22/2019). In the past 52-week period, it has traded between $33.42 and $47.12.
The ETF has a beta of 1.11 and standard deviation of 16.35% for the trailing three-year period, making it a medium risk choice in the space. With about 225 holdings, it effectively diversifies company-specific risk.
First Trust Mid Cap Growth AlphaDEX Fund 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 excellent 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 $7.62 B in assets, iShares Russell Mid-Cap Growth ETF has $11.20 B. IJK has an expense ratio of 0.25% and IWP charges 0.25%.
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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
First Trust Mid Cap Growth AlphaDEX Fund (FNY): ETF Research Reports
EPAM Systems, Inc. (EPAM) : Free Stock Analysis Report
iShares Russell Mid-Cap Growth ETF (IWP): ETF Research Reports
Roku, Inc. (ROKU) : Free Stock Analysis Report
Avalara, Inc. (AVLR) : Free Stock Analysis Report
iShares S&P Mid-Cap 400 Growth ETF (IJK): ETF Research Reports
To read this article on Zacks.com click here.