Designed to provide broad exposure to the Mid Cap Value segment of the US equity market, the First Trust Mid Cap Value AlphaDEX ETF (FNK) 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 $204.48 million, making it one of the smaller ETFs attempting to match the Mid Cap Value segment of the US equity market.
Why Mid Cap Value
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.
Value stocks are known for their lower than average price-to-earnings and price-to-book ratios, but investors should also note their lower than average sales and earnings growth rates. While value stocks have outperformed growth stocks in nearly all markets when you consider long-term performance, growth stocks are more likely to outpace value stocks in strong bull markets.
Costs
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 1.84%.
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 Financials sector--about 20.40% of the portfolio. Consumer Discretionary and Industrials round out the top three.
Looking at individual holdings, Adt Inc. (ADT) accounts for about 0.87% of total assets, followed by Essent Group Ltd. (ESNT) and Molson Coors Beverage Company (TAP).
The top 10 holdings account for about 7.93% of total assets under management.
Performance and Risk
FNK seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Value Index before fees and expenses. 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.
The ETF has lost about -4.93% so far this year and is down about -3.86% in the last one year (as of 04/02/2025). In the past 52-week period, it has traded between $48.96 and $58.28.
The ETF has a beta of 1.12 and standard deviation of 21.49% 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 carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FNK is a reasonable option for those seeking exposure to the Style Box - Mid Cap Value area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell Mid-Cap Value ETF (IWS) and the Vanguard Mid-Cap Value ETF (VOE) track a similar index. While iShares Russell Mid-Cap Value ETF has $13.32 billion in assets, Vanguard Mid-Cap Value ETF has $17.32 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.
Bottom-Line
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 Mid Cap Value AlphaDEX ETF (FNK): ETF Research Reports Molson Coors Beverage Company (TAP): Free Stock Analysis Report ADT Inc. (ADT): Free Stock Analysis Report Essent Group Ltd. (ESNT): Free Stock Analysis Report Vanguard Mid-Cap Value ETF (VOE): ETF Research Reports iShares Russell Mid-Cap Value ETF (IWS): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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