First Trust Small Cap Core AlphaDEX Fund (NASDAQ: FYX)

Latest news for First Trust Small Cap Core AlphaDEX Fund (NASDAQ:FYX)

First Trust Small Cap Core AlphaDEX Fund

First Trust Small Cap Core AlphaDEX

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The Fund will normally invest at least 90 percent of its net assets (including investment borrowings) in the securities that comprise the Index. The Fund, using an indexing investment approach, attempts to replicate, before fees and expenses, the performance of the Index. The Index is owned and is developed, maintained and sponsored by Nasdaq, Inc. (the Index Provider). The Index Provider may, from time to time, exercise reasonable discretion as it deems appropriate in order to maintain Index integrity.

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The First Trust Small Cap Core AlphaDEX ETF (NASDAQ: FYX) was launched on 05/08/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Small Cap Blend category of the market.

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Is First Trust Small Cap Core AlphaDEX ETF a Strong ETF Right Now?

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First Trust Multi Cap Growth AlphaDEX Fund

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Intraday Update

AlphaDEX Alternatives to Cap-Weighted ETFs Prove Their Mettle

The First Trust Small Cap Core AlphaDEX ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/fyx#NASDAQ">FYX</a>) was launched on 05/08/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Small Cap Blend category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the 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.
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.
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.
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 &amp; Index
FYX is managed by First Trust Advisors, and this fund has amassed over $836.92 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Blend. This particular fund 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 &amp; Other Expenses
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&#39;s expense ratio.
Operating expenses on an annual basis are 0.60% for this ETF, which makes it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 1.14%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
FYX&#39;s heaviest allocation is in the Financials sector, which is about 22.30% of the portfolio. Its Industrials and Consumer Discretionary round out the top three.
Looking at individual holdings, Oscar Health, Inc. (class A) (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/oscr#NYSE">OSCR</a>) accounts for about 0.49% of total assets, followed by Modine Manufacturing Company (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/mod#NYSE">MOD</a>) and Sphere Entertainment Co. (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/sphr#NYSE">SPHR</a>).
The top 10 holdings account for about 4.32% of total assets under management.
Performance and Risk
The ETF has lost about -2.04% so far this year and is up about 10.73% in the last one year (as of 06/18/2024). In the past 52-week period, it has traded between $74.82 and $94.11.
The ETF has a beta of 1.25 and standard deviation of 22.19% for the trailing three-year period, making it 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 (ARCA:IWM) tracks Russell 2000 Index and the iShares Core S&amp;P Small-Cap ETF (ARCA:IJR) tracks S&amp;P SmallCap 600 Index. IShares Russell 2000 ETF has $59.91 billion in assets, iShares Core S&amp;P Small-Cap ETF has $76.54 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.
<a href="https://www.zacks.com/stock/news/2289565/is-first-trust-small-cap-core-alphadex-etf-fyx-a-strong-etf-right-now?cid=CS-BENZ-FT-smart_beta_etf-2289565">To read this article on Zacks.com click here.</a>

Finally, the windfall of hurricanes Harvey and Irma are being realized. U.S. factory activity jumped to a more than 13-year high in September thanks to higher new orders and raw material prices. The Institute for Supply Management&#39;s Manufacturing PMI in the United States increased to 60.8 in September 2017 from 58.8 in August, trumping <a href="https://tradingeconomics.com/united-states/business-confidence">market expectations of 58</a>.
Out of the 18 manufacturing industries, as many as 17 registered expansion last month. Just the reading of one industry, Furniture &amp; Related Products, showed sequential contraction in September. In fact, a rebound in construction spending in August has also been noticed. Construction spending increased 0.5% to $1.21 trillion in August. However, July&#39;s construction expenditures were revised down to a 1.2% decline instead of the previously reported 0.6% retreat.
This upbeat performance was sort of expected. Hurricane Harvey flooded Texas at August-end and Irma demolished Florida in early September. So, the need for reconstruction of infrastructure and remodeling of houses was higher post hurricanes (read: <a href="Top%20ETF%20Stories%20of%20Third%20Quarter">Top ETF Stories of Third Quarter</a>).
Against this backdrop, we highlight below a few ETF options that can be good momentum plays.
Industrial Innovation ETF ARKQ 
Most of the industrial ETFs were in the green post release of manufacturing data. While there are several ETFs available in this space, ARKQ is one of the top beneficiaries. This actively managed ETF seeks long-term capital appreciation by investing in companies that benefit from the development of new products or services, technological improvements and advancements in scientific research. The fund gained about 1.1% on Oct 2 (<a href="https://www.zacks.com/funds/etfs/etf-categories/Industrials-ETFs-14">see all industrials ETFs here</a>).
PowerShares Dynamic Building &amp; Construction ETF PKB
Though nonresidential construction spending could decline in September thanks to back-to-back storms, ongoing activity should be higher in the sector. As per the Commerce Department, Texas and Florida made up about 22% of U.S. private nonresidential construction spending in 2016, as quoted on <a href="https://www.cnbc.com/2017/10/02/september-ism-manufacturing-index-august-construction-spending.html">CNBC.com</a>. This indicates the extent of construction activity in the region and PKB is likely to gain from this trend. The fund gained about 0.7% on Oct 2.
First Trust Multi Cap Growth AlphaDEX Fund FAD
The manufacturing sector makes up about <a href="https://www.cnbc.com/2017/10/02/september-ism-manufacturing-index-august-construction-spending.html">12%</a> of the U.S. economy. So, higher activity in this arena clearly points to a rebounding economy. This makes the case for investing in growth ETFs like FAD sensible. The fund gained more than 0.6% on Oct 2 (read: <a href="https://www.zacks.com/stock/news/275518/market-hits-new-record-high-growth-etfs-top">Market Hits New Record High: Growth ETFs Top</a>).
Fidelity Dividend ETF for Rising Rates FDRR
The stronger the economy, the higher the chances of a rate hike in December. In any case, the Fed has been acknowledging the need for a rate hike in the final month of the year. In late September, &quot;the dot plot from the last meeting showed <a href="https://www.housingwire.com/articles/41399-fed-chair-yellen-defends-need-for-december-rate-hike">11 out of the Fed&#39;s 16</a> members are forecasting a rate hike in December.&quot;
Now, upbeat manufacturing data has cemented that possibility. Benchmark 10-Year Treasury bond yield rose to 2.34% on Oct 2 from 2.33% the day before. In this scenario, FDRR can be a good bet. The fund added about 0.5% on Oct 2 (read: <a href="https://www.zacks.com/stock/news/276665/best-etf-strategies-for-a-hawkish-fed">Best ETF Strategies for a Hawkish Fed</a>).
First Trust Small Cap Core AlphaDEX ETF FYX
As the greenback has gained post manufacturing data, chances of outperformance in small-cap ETFs are higher now. This is because small-cap stocks are more domestically focused. The fund added about 1.3% on Oct 2.
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Among the prominent trends in the ETF industry this year has been the realization by advisors, investors and traders that traditional cap-weighted funds are not always the best when it comes to returns. Still, most equity-based ETFs are just that: Weighted by the market values of the funds' underlying components.

Traditional cap-weighted methodologies are particularly common with broad market ETFs such as the SPDR S&amp;P 500 (NYSE: <a class="ticker" href="/stock/spy#NYSE">SPY</a>) and the PowerShares QQQ (NASDAQ: <a class="ticker" href="/stock/qqq#NASDAQ">QQQ</a>). However, there are alternative strategies that have proven to be solid in terms of delivering returns with FirstTrust's AlphaDEX suite being home to some broad market fare that investors may want to consider over more common cap-weighted fare.

In a research note out Thursday, Street One Financial Vice President Paul Weisbruch highlights three AlphaDEX ETFs that represent valid alternatives to traditional broad market ETFs.

One example is the First Trust Large Cap Core AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fex#NYSE">FEX</a>), which tracks the Defined Large Cap Core Index. That index screens the S&amp;P based on a variety of growth and value factors, including three, six and 12-month price appreciation, sales to price, one year sales growth, book value to price, cash flow to price and return on assets, <a href="http://www.ftportfolios.com/Retail/Etf/EtfSummary.aspx?Ticker=FEX">according to First Trust</a>.

The result is an ETF with the top 75 percent of the S&amp;P 500 and a fund that is far from cap-weighted as GameStop (NYSE: <a class="ticker" href="/stock/gme#NYSE">GME</a>), Ford (NYSE: <a class="ticker" href="/stock/f#NYSE">F</a>) and Aetna (NYSE: <a class="ticker" href="/stock/aet#NYSE">AET</a>) are among FEX's top-10 holdings. What is important to note, as Weisbruch points out, is that since coming to market in May 2007, FEX has outperformed SPY. In fact, the First Trust offering has generated positive returns over that time while SPY is in the red. Today, FEX has almost $345 million in assets under management.

A similar situation is found with the First Trust Mid Cap Core AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/fnx#NYSE">FNX</a>) and the SPDR S&amp;P MidCap 400 ETF (NYSE: <a class="ticker" href="/stock/mdy#NYSE">MDY</a>). 

FNX's approach mirrors that of FEX, but in this case the index tracked is the Defined Mid Cap Core Index and the ETF's constituents are the top 75 percent of the S&amp;P MidCap 400 Index. FNX came to market on the same day in May 2007 as FEX and its ability to outperform rival funds such as MDY has been impressive.

Since its debut, FNX has outpaced MDY by over 950 basis points, though MDY has been the winner over the past 12 months. FNX has over $303 million in assets.

The scenario repeats at the small-cap level as the First Trust Small Cap Core AlphaDEX (NYSE: <a class="ticker" href="/stock/fyx#NYSE">FYX</a>) has outpaced the iShares Core S&amp;P Small-Cap ETF (NYSE: <a class="ticker" href="/stock/ijr#NYSE">IJR</a>) since May 2007. FYX's constituents are pulled from the S&amp;P SmallCap 600 Index, the same index tracked by IJR. Since inception, "FYX has outpaced the S&amp;P 600 SmallCap Index 11.65% versus 8.08%," according to Chojnacki.

"As one might imagine, a fundamentally weighted index would vary significantly head to head against a market cap weighted index (calculated by share price times shares outstanding) in terms of individual equity weightings. Since inception in 2007, based on live returns in these ETFs, First Trust has demonstrated thus far that notable value can be added in an alternative weighting methodology to the market cap," said Weisbruch.

For more on AlphaDex ETFs, click <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/10/2971334/alphadex-etfs-do-things-differently-with-stellar-results">here</a>.

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