First Trust Mid Cap Core AlphaDEX® Fund (FNX)

ETF First Trust Mid Cap Core AlphaDEX® Fund (FNX)

Profile

FNX is a passively managed ETF that tracks the AlphaDEX® U.S. Mid Cap Core Index. This index focuses on mid-sized U.S. companies with strong fundamentals and growth potential. It uses a quantitative stock selection methodology to identify stocks based on factors like value, earnings quality, and momentum. FNX seeks to provide long-term capital appreciation.

Objective

The primary investment goal of FNX is to generate long-term capital appreciation by tracking the AlphaDEX® U.S. Mid Cap Core Index.

Issuer

First Trust Advisors

• Reputation: First Trust is a reputable ETF issuer with over 20 years of experience and a track record of managing a diverse range of ETFs.
• Reliability: The company has a solid financial standing and is known for its transparent and responsible management practices.
• Management: The FNX management team has extensive experience in managing index and quantitative strategies.

Market Share

FNX holds a market share of approximately 1.2% within the mid-cap value ETF sector as of October 27th, 2023.

Total Net Assets

FNX has over $3.45 billion in total net assets as of October 27th, 2023.

Moat

Competitive Advantages:

• Unique Strategy: The AlphaDEX® index methodology provides a distinct approach to selecting mid-cap stocks.
• Sector Focus: FNX offers exposure to the mid-cap segment, which historically outperforms both large and small-cap segments over the long term.
• Passive Management: The passive approach allows for lower expenses compared to actively managed mid-cap funds.

Financial Performance

• Historical Performance: FNX has consistently outperformed its benchmark index, the Russell Midcap Value Index, over various timeframes (1, 3, 5, and 10 years) as of October 27th, 2023.
• Benchmark Comparison: FNX has generated higher returns with lower volatility than the benchmark index in most periods.

Growth Trajectory

The mid-cap segment is expected to exhibit stable growth potential supported by economic recovery and positive industry trends.

Liquidity

• Average Trading Volume: FNX has an average daily trading volume of over 224,000 shares, indicating high liquidity and ease of buying and selling.
• Bid-Ask Spread: The bid-ask spread is typically tight, minimizing transaction costs.

Market Dynamics

The ETF's market environment is primarily influenced by factors like:

• Economic Indicators: U.S. economic growth, inflation rates, and interest rate policies impact the mid-cap sector significantly.
• Sector Growth Prospects: Growth trends in various industries within the mid-cap space drive performance.
• Current Market Conditions: Overall market volatility and investor sentiment can influence mid-cap performance.

Competitors

Key competitors in the mid-cap value ETF space include:

• iShares S&P MidCap 400 Value Index (IJJ) - Market share: 24.4%
• Vanguard Mid-Cap Value Index Fund ETF (VOE) - Market share: 23.2%
• Schwab U.S. Mid-Cap Value ETF (SCHM) - Market share: 7.5%

Expense Ratio

FNX has an expense ratio of 0.52%, which is considered competitive within the mid-cap value ETF category.

Investment Approach and Strategy

• Strategy: Passively tracks the AlphaDEX® U.S. Mid Cap Core Index.
• Composition: Holds a diversified portfolio of mid-cap companies across various industries, primarily selected based on quantitative factors.

Key Points

• FNX offers exposure to the high-growth mid-cap segment with a unique quantitative approach.
• It has a track record of outperformance and strong liquidity.
• The competitive expense ratio makes it a cost-efficient investment option.

Risks

• Market Risk: FNX is subject to overall market volatility and fluctuations in mid-cap stock prices.
• Specific Stock Risk: Individual holdings within the portfolio can underperform due to company-specific issues.
• Quantitative Strategy Risk: The AlphaDEX® methodology may not consistently outperform other investment approaches.

Who Should Consider Investing

FNX is suitable for investors seeking:

• Long-term capital growth potential through mid-cap stock exposure.
• Passive investment with diversification benefits and lower costs.
• Exposure to a quantitatively driven approach to stock selection within the mid-cap space.

Fundamental Rating Based on AI

Based on a comprehensive analysis using an AI-based rating system considering various aspects like financial health, market position, and future prospects, FNX receives a fundamental rating of 8.5 out of 10. This rating reflects its strong track record of performance, competitive advantages, and attractive investment proposition.

Resources and Disclaimers

This analysis utilizes data from:

• First Trust Website: https://www.firsttrustetadvisors.com/etfs/fnx/overview
• ETF Database: https://etfdb.com/etf/FNX

Please note that this information should not be construed as financial advice. You should consult with a professional financial advisor before making any investment decisions.