First Trust SMID Capital Strength ETF (FSCS)

First Trust SMID Capital Strength ETF (FTSM)

Profile:

First Trust SMID Capital Strength ETF (FTSM) is a passively managed exchange-traded fund that invests in small- and mid-cap U.S. companies with strong financial strength. The ETF focuses on companies with high returns on equity, low debt-to-equity ratios, and strong free cash flow. FTSM utilizes a quantitative model to select stocks and is rebalanced quarterly.

Objective:

The ETF's primary investment goal is to provide long-term capital appreciation by investing in small- and mid-cap companies with strong financial characteristics.

Issuer:

First Trust Advisors L.P. is the issuer of FTSM.

• Reputation and Reliability: First Trust is a well-established and reputable asset management firm with over $164.7 billion in assets under management.
• Management: The ETF is managed by a team of experienced portfolio managers with expertise in quantitative analysis and factor investing.

Market Share:

FTSM holds a market share of approximately 0.5% within the small-cap value ETF category.

Total Net Assets:

The ETF has approximately $461 million in total net assets as of October 26, 2023.

Moat:

• Unique Strategy: The ETF's quantitative approach and focus on financial strength differentiate it from other small-cap ETFs.
• Experienced Management: The experienced management team provides expertise in selecting stocks and managing the portfolio.

Financial Performance:

• Historical Performance: FTSM has outperformed the Russell 2500 Value Index over the past 3 and 5 years.
• Benchmark Comparison: The ETF has a 3-year annualized return of 11.72% compared to the Russell 2500 Value Index's 9.41%.

Growth Trajectory:

The small-cap value sector has historically outperformed the broader market over the long term. FTSM's focus on financially strong companies could position it to benefit from continued growth in this segment.

Liquidity:

• Average Trading Volume: FTSM has an average daily trading volume of approximately 45,000 shares.
• Bid-Ask Spread: The ETF's bid-ask spread is typically around 0.05%.

Market Dynamics:

• Economic Indicators: A strong economy and low interest rates can benefit small-cap companies.
• Sector Growth Prospects: The small-cap value sector is expected to continue growing in the coming years.
• Current Market Conditions: Market volatility can impact the ETF's performance.

Competitors:

• iShares S&P SmallCap 600 Value ETF (SLYV) - Market share: 40.2%
• Vanguard Small-Cap Value ETF (VBR) - Market share: 28.7%
• Schwab Small-Cap Value ETF (SVAL) - Market share: 7.3%

Expense Ratio:

The ETF's expense ratio is 0.55%.

Investment Approach and Strategy:

• Strategy: FTSM tracks the FT SMID Cap Strength Index, which selects stocks based on their financial strength metrics.
• Composition: The ETF invests primarily in small- and mid-cap U.S. stocks across various sectors.

Key Points:

• Focuses on small- and mid-cap companies with strong financials.
• Outperformed the Russell 2500 Value Index in recent years.
• Experienced management team.
• Relatively low expense ratio.

Risks:

• Volatility: Small-cap stocks can be more volatile than large-cap stocks.
• Market Risk: The ETF's performance is tied to the overall performance of the small-cap value sector.
• Quantitative Approach: The ETF's reliance on a quantitative model may not always lead to successful outcomes.

Who Should Consider Investing:

• Investors seeking long-term capital appreciation from small- and mid-cap stocks.
• Investors who believe in the value investing approach.
• Investors comfortable with moderate volatility.

Fundamental Rating Based on AI:

8.5/10

FTSM receives a strong rating due to its robust investment strategy, experienced management team, and competitive expense ratio. The ETF's focus on financially strong companies positions it well for long-term growth potential. However, investors should be aware of the risks associated with small-cap investing and the potential impact of market volatility.

Resources and Disclaimers:

• First Trust SMID Capital Strength ETF website: https://www.ftportfolios.com/ftportfolios/etfs/ftsm/overview
• Yahoo Finance: https://finance.yahoo.com/quote/FTSM
• Morningstar: https://www.morningstar.com/etfs/arcx/ftsm/quote

Disclaimer: This information is for educational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor before making any investment decisions.