Launched on 04/19/2011, the First Trust Small Cap Value AlphaDEX ETF (FYT) is a passively managed exchange traded fund designed to provide a broad exposure to the Small Cap Value segment of the US equity market.
The fund is sponsored by First Trust Advisors. It has amassed assets over $203.78 million, making it one of the average sized ETFs attempting to match the Small Cap Value segment of the US equity market.
Why Small Cap Value
Small cap companies have market capitalization below $2 billion. They usually have higher potential than large and mid cap companies with stocks but higher risk.
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.
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 0.73%, making it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 1.19%.
Sector Exposure and Top Holdings
ETFs offer a 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.
This ETF has heaviest allocation to the Financials sector--about 26.70% of the portfolio. Consumer Discretionary and Industrials round out the top three.
Looking at individual holdings, Anywhere Real Estate Inc. (HOUS) accounts for about 0.76% of total assets, followed by Wolverine World Wide, Inc. (WWW) and Skywest, Inc. (SKYW).
The top 10 holdings account for about 7.06% of total assets under management.
Performance and Risk
FYT seeks to match the performance of the Nasdaq AlphaDEX Small Cap Value Index before fees and expenses. The NASDAQ AlphaDEX Small Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Value Index.
The ETF has added roughly 14.53% so far this year and was up about 1.12% in the last one year (as of 02/02/2023). In the past 52-week period, it has traded between $40.51 and $52.74.
The ETF has a beta of 1.38 and standard deviation of 36.71% for the trailing three-year period, making it a high risk choice in the space. With about 263 holdings, it effectively diversifies company-specific risk.
First Trust Small 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, FYT is a reasonable option for those seeking exposure to the Style Box - Small Cap Value area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell 2000 Value ETF (IWN) and the Vanguard Small-Cap Value ETF (VBR) track a similar index. While iShares Russell 2000 Value ETF has $12.73 billion in assets, Vanguard Small-Cap Value ETF has $26.33 billion. IWN has an expense ratio of 0.23% and VBR charges 0.07%.
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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