Is First Trust Small Cap Core AlphaDEX ETF (FYX) a Strong ETF Right Now?
The First Trust Small Cap Core AlphaDEX ETF (FYX) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Small Cap Blend category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FYX has been able to amass assets over $782.40 million, making it one of the average sized ETFs in the Style Box - Small Cap Blend. Before fees and expenses, FYX 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
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 0.61% for FYX, making it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 1.08%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Representing 18.20% of the portfolio, the fund has heaviest allocation to the Financials sector; Industrials and Consumer Discretionary round out the top three.
Looking at individual holdings, Anywhere Real Estate Inc. (HOUS) accounts for about 0.38% of total assets, followed by Axcelis Technologies, Inc. (ACLS) and Wolverine World Wide, Inc. (WWW).
The top 10 holdings account for about 3.6% of total assets under management.
Performance and Risk
Year-to-date, the First Trust Small Cap Core AlphaDEX ETF has added about 1.06% so far, and is down about -13.83% over the last 12 months (as of 03/31/2023). FYX has traded between $72.71 and $92.21 in this past 52-week period.
The fund has a beta of 1.27 and standard deviation of 28.51% for the trailing three-year period, which makes FYX a medium risk choice in this particular space. With about 526 holdings, it effectively diversifies company-specific risk.
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 $50.11 billion in assets, iShares Core S&P Small-Cap ETF has $65.56 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.
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 Core AlphaDEX ETF (FYX): ETF Research Reports
Wolverine World Wide, Inc. (WWW) : Free Stock Analysis Report
Axcelis Technologies, Inc. (ACLS) : Free Stock Analysis Report
iShares Russell 2000 ETF (IWM): ETF Research Reports
iShares Core S&P Small-Cap ETF (IJR): ETF Research Reports
Anywhere Real Estate Inc. (HOUS) : Free Stock Analysis Report
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