Is First Trust Small Cap Core AlphaDEX ETF (FYX) a Strong ETF Right Now?
A smart beta exchange traded fund, the First Trust Small Cap Core AlphaDEX ETF (FYX) debuted on 05/08/2007, and offers broad exposure to the Style Box - Small Cap Blend category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $915.31 million, this makes it one of the average sized ETFs in the Style Box - Small Cap Blend. FYX is managed by First Trust Advisors. FYX, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Small Cap Core Index.
The NASDAQ AlphaDEX Small Cap Core Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Index.
Cost & Other Expenses
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 cousins, other things remaining 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.
The fund has a 12-month trailing dividend yield of 1.43%.
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.
FYX's heaviest allocation is in the Financials sector, which is about 22.80% of the portfolio. Its Industrials and Consumer Discretionary round out the top three.
Taking into account individual holdings, Adma Biologics, Inc. (ADMA) accounts for about 0.52% of the fund's total assets, followed by Zeta Global Holdings Corp. (class A) (ZETA) and Powell Industries, Inc. (POWL).
The top 10 holdings account for about 4.38% of total assets under management.
Performance and Risk
So far this year, FYX has gained about 9.43%, and is up about 31.37% in the last one year (as of 10/22/2024). During this past 52-week period, the fund has traded between $74.82 and $101.40.
The ETF has a beta of 1.23 and standard deviation of 22.43% for the trailing three-year period, making it a medium risk choice in the space. With about 527 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Core AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 2000 ETF (IWM) tracks Russell 2000 Index and the iShares Core S&P Small-Cap ETF (IJR) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $70.47 billion in assets, iShares Core S&P Small-Cap ETF has $86 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.
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 - Small 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.
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 Small Cap Core AlphaDEX ETF (FYX): ETF Research Reports
iShares Russell 2000 ETF (IWM): ETF Research Reports
Powell Industries, Inc. (POWL) : Free Stock Analysis Report
ADMA Biologics Inc (ADMA) : Free Stock Analysis Report
iShares Core S&P Small-Cap ETF (IJR): ETF Research Reports
Zeta Global Holdings Corp. (ZETA) : Free Stock Analysis Report