Designed to provide broad exposure to the Small Cap Growth segment of the US equity market, the First Trust Small Cap Growth AlphaDEX Fund (FYC) is a passively managed exchange traded fund launched on 04/19/2011.
The fund is sponsored by First Trust Advisors. It has amassed assets over $234.68 M, making it one of the average sized ETFs attempting to match the Small Cap Growth segment of the US equity market.
Why Small Cap Growth
Small cap companies have market capitalization below $2 billion. They usually have higher potential than large and mid cap companies with stocks but higher risk.
Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. When you consider growth versus value, growth stocks are usually the clear winner in strong bull markets but tend to fall flat in nearly all other environments.
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining 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 0.12%.
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 Industrials sector--about 18.40% of the portfolio. Financials and Information Technology round out the top three.
Looking at individual holdings, Installed Building Products, Inc. (IBP) accounts for about 0.82% of total assets, followed by Crocs, Inc. (CROX) and Diodes Incorporated (DIOD).
The top 10 holdings account for about 7.46% of total assets under management.
Performance and Risk
FYC seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index before fees and expenses. The NASDAQ AlphaDEX Small Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Growth Index.
The ETF has gained about 12.59% so far this year and is up roughly 0.38% in the last one year (as of 11/14/2019). In the past 52-week period, it has traded between $37.33 and $47.54.
The ETF has a beta of 1.12 and standard deviation of 17.48% for the trailing three-year period, making it a high risk choice in the space. With about 263 holdings, it effectively diversifies company-specific risk.
First Trust Small 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, FYC is a great option for investors seeking exposure to the Style Box - Small Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares Russell 2000 Growth ETF (IWO) and the Vanguard Small-Cap Growth ETF (VBK) track a similar index. While iShares Russell 2000 Growth ETF has $9.14 B in assets, Vanguard Small-Cap Growth ETF has $9.23 B. IWO has an expense ratio of 0.24% and VBK charges 0.07%.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
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 Small Cap Growth AlphaDEX Fund (FYC): ETF Research Reports
Installed Building Products, Inc. (IBP) : Free Stock Analysis Report
Diodes Incorporated (DIOD) : Free Stock Analysis Report
Vanguard Small-Cap Growth ETF (VBK): ETF Research Reports
iShares Russell 2000 Growth ETF (IWO): ETF Research Reports
Crocs, Inc. (CROX) : Free Stock Analysis Report
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