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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?

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.

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.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

Managed by First Trust Advisors, FYX has amassed assets over $782.39 million, making it one of the average sized ETFs in the Style Box - Small Cap Blend. FYX seeks to match the performance of the Nasdaq AlphaDEX Small Cap Core Index before fees and expenses.

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

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

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 1.23%.

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 24.30% of the portfolio. Its Industrials and Consumer Discretionary round out the top three.

Looking at individual holdings, Lantheus Holdings, Inc. (LNTH) accounts for about 0.42% of total assets, followed by Asbury Automotive Group, Inc. (ABG) and Mgp Ingredients, Inc. (MGPI).

FYX's top 10 holdings account for about 3.93% of its total assets under management.

Performance and Risk

The ETF has lost about -20.21% so far this year and is down about -11.78% in the last one year (as of 09/22/2022). In the past 52-week period, it has traded between $74.54 and $101.

FYX has a beta of 1.26 and standard deviation of 32.79% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 526 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 SmallCap ETF (IJR) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $49.31 billion in assets, iShares Core S&P SmallCap ETF has $62.74 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.


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First Trust Small Cap Core AlphaDEX ETF (FYX): ETF Research Reports
 
Asbury Automotive Group, Inc. (ABG) : Free Stock Analysis Report
 
iShares Russell 2000 ETF (IWM): ETF Research Reports
 
Lantheus Holdings, Inc. (LNTH) : Free Stock Analysis Report
 
iShares Core S&P SmallCap ETF (IJR): ETF Research Reports
 
MGP Ingredients, Inc. (MGPI) : Free Stock Analysis Report
 
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