Designed to provide broad exposure to the Style Box - Mid Cap Blend category of the market, the First Trust Mid Cap Core AlphaDEX ETF (FNX) is a smart beta exchange traded fund launched on 05/08/2007.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $1.32 billion, this makes it one of the average sized ETFs in the Style Box - Mid Cap Blend. FNX is managed by First Trust Advisors. FNX seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Core Index before fees and expenses.
The NASDAQ AlphaDEX Mid Cap Core Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 600 Mid Cap Index.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.60% for this ETF, which makes it one of the more expensive products in the space.
FNX's 12-month trailing dividend yield is 1.17%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
FNX's heaviest allocation is in the Financials sector, which is about 19.60% of the portfolio. Its Industrials and Consumer Discretionary round out the top three.
Looking at individual holdings, Sprouts Farmers Market, Inc. (SFM) accounts for about 0.44% of total assets, followed by Knife River Corporation (KNF) and Helmerich & Payne, Inc. (HP).
Its top 10 holdings account for approximately 4.08% of FNX's total assets under management.
Performance and Risk
So far this year, FNX has gained about 18.80%, and is up roughly 26.50% in the last one year (as of 12/12/2024). During this past 52-week period, the fund has traded between $99.87 and $127.28.
FNX has a beta of 1.20 and standard deviation of 21.13% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 452 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Mid Cap Core AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Mid Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Mid-Cap ETF (VO) tracks CRSP US Mid Cap Index and the iShares Core S&P Mid-Cap ETF (IJH) tracks S&P MidCap 400 Index. Vanguard Mid-Cap ETF has $75.49 billion in assets, iShares Core S&P Mid-Cap ETF has $100.14 billion. VO has an expense ratio of 0.04% and IJH charges 0.05%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Mid Cap Blend.
Bottom Line
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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Get it free >>First Trust Mid Cap Core AlphaDEX ETF (FNX): ETF Research Reports
Helmerich & Payne, Inc. (HP) : Free Stock Analysis Report
Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report
iShares Core S&P Mid-Cap ETF (IJH): ETF Research Reports
Vanguard Mid-Cap ETF (VO): ETF Research Reports
Knife River Corporation (KNF) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
