First Trust SMID Capital Strength ETF (FSCS)

Overview

The First Trust SMID Capital Strength ETF (FTSM) seeks to provide investment results that correspond to the performance of the AlphaDEXu00ae Small Cap Core Index. It focuses on small and mid-capitalization (SMID) companies with strong capital strength characteristics, selecting stocks based on growth and value factors.

Reputation and Reliability

First Trust is a well-established ETF provider with a reputation for innovation and a broad range of investment products.

Management Expertise

First Trust Advisors L.P. has extensive experience managing ETFs and employing quantitative methodologies.

Goal

To replicate the performance of the AlphaDEXu00ae Small Cap Core Index.

Investment Approach and Strategy

Strategy: The ETF employs a quantitative, rules-based approach to select and weight stocks based on fundamental factors.

Composition Primarily holds common stocks of small and mid-capitalization U.S. companies.

Market Share: FTSM's market share within the SMID-cap blend ETF category is moderate, reflecting competition from larger, more established funds.

Total Net Assets (AUM): 439000000

Key Competitors

• IJR
• VIOV
• SLYV

Competitive Landscape

The SMID-cap ETF market is highly competitive. FTSM's AlphaDEXu00ae methodology differentiates it but it competes with larger, lower-cost index funds like IJR. A potential advantage is its selection criteria aiming for companies with stronger fundamentals, though this comes with a higher expense ratio compared to simple index trackers. The disadvantage is its smaller AUM and lower liquidity than the major competitors.

Historical Performance: Historical performance data should be obtained from official sources such as the fund's website or financial data providers.

Benchmark Comparison: The ETF's performance should be compared to the AlphaDEXu00ae Small Cap Core Index to assess tracking accuracy.

Expense Ratio: 0.7

Average Trading Volume

The average trading volume of FTSM is moderate, which could impact the ease of buying and selling shares, especially in larger quantities.

Bid-Ask Spread

The bid-ask spread varies depending on market conditions and trading volume; a wider spread increases trading costs.

Market Environment Factors

Economic growth, interest rates, and investor sentiment towards small and mid-cap stocks influence FTSM's performance. The fund's sector allocation also affects its performance based on sector-specific trends.

Growth Trajectory

The growth trajectory depends on the continued adoption of its quantitative methodology and investor appetite for fundamentally-screened SMID-cap stocks. Changes to the underlying index methodology could also impact performance.

Competitive Edge

FTSM's competitive advantage lies in its proprietary AlphaDEXu00ae methodology, which seeks to identify SMID-cap companies with strong growth and value characteristics. This methodology aims to outperform traditional market-cap weighted indexes. Its focus on capital strength offers a distinct approach within the SMID-cap universe. However, this advantage may be offset by a higher expense ratio compared to passively managed alternatives.

Volatility

FTSM's volatility is expected to be comparable to other SMID-cap ETFs, reflecting the inherent risk of investing in smaller companies.

Market Risk

Market risk includes the potential for broad market declines and sector-specific risks impacting the underlying holdings. Additionally, the AlphaDEXu00ae methodology may underperform in certain market conditions.

Ideal Investor Profile

The ideal investor is someone seeking exposure to SMID-cap stocks with a focus on companies exhibiting strong fundamentals, and is willing to accept a higher expense ratio for the potential of outperformance.

Market Risk

FTSM may be suitable for long-term investors seeking to enhance their SMID-cap exposure with a factor-based approach, rather than purely passive index tracking. It suits someone with a higher risk tolerance.

The First Trust SMID Capital Strength ETF (FTSM) offers exposure to fundamentally sound SMID-cap companies using the AlphaDEXu00ae methodology. Its goal is to outperform market-cap weighted SMID-cap indexes, but it comes with a higher expense ratio. It is appropriate for investors looking for a smart beta approach within the SMID-cap space. Potential investors need to compare it with low-cost index funds and consider the fund's liquidity and trading volume.

Data Sources:

• First Trust Advisors L.P.
• ETF.com
• Morningstar

Disclaimers:

This analysis is for informational purposes only and should not be considered investment advice. Past performance is not indicative of future results. Investors should conduct their own due diligence before making investment decisions.