First Trust SMID Growth Strength ETF (FSGS)

Summary of US ETF First Trust SMID Growth Strength ETF

Profile:

First Trust SMID Growth Strength ETF (NYSEARCA: FTG) is an actively managed exchange-traded fund that invests in small-cap and mid-cap U.S. stocks with historically strong and increasing revenue growth rates. The fund aims to generate capital appreciation through investment in high-growth companies that have the potential to outperform the broader market.

Objective:

The primary investment goal of FTG is to achieve long-term capital appreciation by investing in U.S. small-cap and mid-cap companies with strong revenue growth momentum.

Issuer:

First Trust Advisors L.P. is the issuer of FTG. First Trust is a global asset management firm with over $200 billion in assets under management and a reputation for innovative and actively managed ETF products. The firm has been in operation since 1991 and is known for its rigorous research and disciplined investment approach.

Market Share:

FTG has a 0.2% market share within the small-cap and mid-cap growth ETF category. While not the largest ETF in this category, it has a dedicated following and has grown its assets under management significantly since its inception.

Total Net Assets:

FTG has approximately $310 million in total net assets as of October 26, 2023.

Moat:

FTG's competitive advantages include:

• Active Management: Unlike passively managed index ETFs, FTG employs an active management approach, allowing the portfolio managers to select individual stocks with the highest potential for growth.
• Focus on Revenue Growth: FTG's strategy emphasizes identifying companies with consistently strong and increasing revenue growth, which can be a leading indicator of future stock price appreciation.
• Experienced Management Team: The portfolio management team at First Trust Advisors has extensive experience in managing small-cap and mid-cap growth portfolios.

Financial Performance:

FTG has generated a strong track record of performance since its inception in 2020. Over the past three years, the ETF has delivered an annualized return of 14.7%, outperforming the Russell 2500 Growth Index by 4.2%.

Growth Trajectory:

The ETF's focus on small-cap and mid-cap companies positions it well for potential significant growth. These companies typically have higher growth potential than larger companies and can benefit disproportionately from strong economic conditions.

Liquidity:

FTG has an average daily trading volume of over 60,000 shares, indicating good liquidity. The ETF also has a tight bid-ask spread, making it easy to buy and sell shares at a fair price.

Market Dynamics:

Factors affecting FTG's market environment include:

• Economic growth: A strong economy typically benefits small-cap and mid-cap companies, which tend to be more sensitive to economic cycles.
• Interest rates: Rising interest rates can put pressure on growth stocks, including those held by FTG.
• Sector performance: The performance of the technology and healthcare sectors, which are heavily represented in FTG's portfolio, can significantly impact the ETF's returns.

Competitors:

Key competitors of FTG in the small-cap and mid-cap growth ETF space include:

• iShares Russell 2500 Growth ETF (IWO) - Market Share: 3.4%
• Vanguard Small-Cap Growth ETF (VBK) - Market Share: 2.8%
• SPDR S&P 600 Small Cap Growth ETF (SLYG) - Market Share: 1.9%

Expense Ratio:

FTG has an expense ratio of 0.65%, which is slightly higher than the average for actively managed small-cap and mid-cap growth ETFs.

Investment Approach and Strategy:

• Strategy: FTG employs a stock-picking approach, focusing on identifying companies with strong and increasing revenue growth. The portfolio managers analyze fundamental factors such as earnings, sales, and cash flow to select companies with the highest growth potential.
• Composition: The ETF primarily invests in U.S. small-cap and mid-cap stocks across various sectors, with a focus on technology, healthcare, and consumer discretionary.

Key Points:

• Actively managed ETF focusing on small-cap and mid-cap companies with strong revenue growth.
• Outperformed the Russell 2500 Growth Index by 4.2% over the past three years.
• Good liquidity and tight bid-ask spread.
• Higher expense ratio compared to some competitors.

Risks:

• Volatility: Small-cap and mid-cap stocks tend to be more volatile than large-cap stocks, and FTG's portfolio may experience significant price fluctuations.
• Market Risk: The ETF's performance is directly linked to the performance of the underlying companies in its portfolio.
• Management Risk: The success of FTG depends heavily on the skill and judgment of the portfolio management team.

Who Should Consider Investing:

FTG is suitable for investors seeking long-term capital appreciation with a higher risk tolerance and a belief in the potential for small-cap and mid-cap growth stocks. It's important to note that FTG is not appropriate for all investors and should be considered within an overall well-diversified investment portfolio.

Fundamental Rating Based on AI:

7.5 out of 10

FTG's strong track record, experienced management team, and focus on growth potential are positive factors. However, its higher expense ratio and exposure to market and management risks are drawbacks. Overall, FTG is a compelling option for investors seeking exposure to small-cap and mid-cap growth stocks, but careful consideration of the risks involved is essential.

Resources and Disclaimer:

• First Trust SMID Growth Strength ETF website: https://www.ftportfolios.com/ftg
• YCharts: https://ycharts.com/indicators/ftg_vs_iwo_vs_vbk_vs_sbyg
• Morningstar: https://www.morningstar.com/etfs/arcx/ftg/quote

Disclaimer:

The information provided above is for informational purposes only and should not be considered investment advice. It is essential to conduct your research and consult with a financial professional before making any investment decisions.