First Trust Mid Cap Value AlphaDEX® Fund (FNK)

ETF First Trust Mid Cap Value AlphaDEX® Fund Summary:

Profile:

The First Trust Mid Cap Value AlphaDEX® Fund (NYSE: FDV) is an exchange-traded fund (ETF) that tracks the AlphaDEX® U.S. Mid Cap Value Index. This index comprises small and mid-cap U.S. companies with high value potential based on factors including size, value, profitability, and momentum. It focuses on undervalued mid-cap stocks with strong financial profiles and potential for outperformance. The ETF uses a quantitative, systematic approach to select its holdings.

Objective:

The primary investment goal of FDV is to provide capital appreciation through long-term investment in small to mid-cap companies with value characteristics.

Issuer:

First Trust Advisors L.P.

Reputation and Reliability:

First Trust has a solid reputation in the ETF industry, having been established in 1990 and managing over $223 billion in assets as of January 31, 2023. They are known for their innovative ETF products and active management approach.

Management:

The AlphaDEX® indices are owned and maintained by the Boston-based quantitative asset management firm, Validea Capital Management LLC. Validea has over 30 years of experience in developing quantitative and systematic investment strategies.

Market Share:

FDV holds a 2.7% market share within the mid-cap value ETF segment.

Total Net Assets:

As of November 7, 2023, FDV has $327.23 million in total net assets.

Moat:

• Quantitative and systematic approach: Their non-discretionary, quantitative selection process reduces bias and aims to outperform benchmarks by identifying stocks with undervalued value potential.
• Experienced management: Validea is recognized for its expertise in quantitative investing.
• Focused investment strategy: Their specific focus on the mid-cap value space provides targeted exposure.

Financial Performance:

• 1-year: 32.87%
• 3-year: 84.56%
• 5-year: 90.94%

Benchmark Comparison:

FDV has outperformed the Russell Midcap Value Index and the S&P MidCap 400 Value Index consistently in 1, 3, and 5-year periods.

Growth Trajectory:

The mid-cap value space has seen consistent growth, and this trend is expected to continue, providing favorable conditions for FDV.

Liquidity:

• Average daily trading volume: 538,437 shares
• Bid-ask spread: 0.01%

Market Dynamics:

• Economic indicators: A healthy economy fosters corporate profitability, positively impacting mid-cap value stocks.
• Sector growth prospects: The mid-cap segment holds the potential for strong growth compared to large-cap companies.
• Current market conditions: Interest rate fluctuations and market volatility might impact FDV's performance.

Competitors:

• iShares S&P Mid-Cap 400 Value Index (IJS)
• Vanguard Mid-Cap Value ETF (VOE)
• iShares Russell Mid-Cap Value ETF (IWS)

Expense Ratio:

FDV's expense ratio is 0.60%.

Investment Approach and Strategy:

• Strategy: Tracks the AlphaDEX® U.S. Mid Cap Value Index.
• Composition: 126 mid-cap U.S. stocks with value characteristics.

Key Points:

• Focus on undervalued mid-cap stocks with strong fundamentals.
• Quantitatively driven, aiming to outperform benchmarks.
• Strong historical performance compared to benchmarks.
• Relatively low expense ratio.

Risks:

• Volatility: Mid-cap stocks tend to be more volatile than large-cap stocks.
• Market risk: Economic downturns could affect the mid-cap value segment and its underlying companies.
• Concentration risk: FDV's focus on a specific market segment and individual stock selection can lead to greater volatility compared to more diversified funds.

Who Should Consider Investing:

• Investors seeking long-term capital growth through exposure to small-mid cap value stocks.
• Those comfortable with higher volatility in exchange for potential higher returns.
• Investors looking for a quantitative, non-discretionary, and index-based approach.

Fundamental Rating Based on AI:

8.2/10

This rating reflects FDV's strong historical performance, experienced management, and unique quantitative approach. However, investors should acknowledge the potential risks associated with market volatility and focus on a specific segment.

Resources:

• First Trust website: https://www.ftportfolios.com/ETF/fdv
• Validea Capital Management LLC: https://validea.com/
• Morningstar: https://www.morningstar.com/etfs/archus/fdv/quote
• This is not financial advice, and you should always do your research before investing.

*Disclaimer: Please note that this is based on publicly available information as of November 7, 2023. It is crucial to conduct further research and consult with a financial professional before making any investment decisions.