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

Zacks Equity Research

The First Trust Mid Cap Growth AlphaDEX Fund (FNY) was launched on 04/19/2011, and is a passively managed exchange traded fund designed to offer 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 $252.47 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, with market capitalization in the range of $2 billion and $10 billion, offer investors many things that small and large companies don't, including less risk and higher growth opportunities. These types of companies, then, have a good balance of stability and growth potential.

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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. Compared to value stocks, growth stocks are a safer bet in a strong bull market, but don't perform as strongly in almost all other financial environments.

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 the most expensive products in the space.

It has a 12-month trailing dividend yield of 0.05%.

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 26% of the portfolio. Healthcare and Industrials round out the top three.

Looking at individual holdings, Cree, Inc. (CREE) accounts for about 0.86% of total assets, followed by Floor & Decor Holdings, Inc. (class A) (FND) and Okta, Inc. (OKTA).

The top 10 holdings account for about 8.04% 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 gained about 20.18% so far this year and is up about 2.26% in the last one year (as of 05/15/2019). In the past 52-week period, it has traded between $33.42 and $47.12.

The ETF has a beta of 1.15 and standard deviation of 16.34% 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.

Alternatives

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 $7.44 B in assets, iShares Russell Mid-Cap Growth ETF has $10.52 B. IJK has an expense ratio of 0.25% and IWP charges 0.25%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they 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 Fund (FNY): ETF Research Reports
 
iShares Russell Mid-Cap Growth ETF (IWP): ETF Research Reports
 
Cree, Inc. (CREE) : Free Stock Analysis Report
 
Okta, Inc. (OKTA) : Free Stock Analysis Report
 
Floor & Decor Holdings, Inc. (FND) : Free Stock Analysis Report
 
iShares S&P Mid-Cap 400 Growth ETF (IJK): ETF Research Reports
 
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Zacks Investment Research