First Trust Mid Cap US Equity Select ETF (RNMC)

ETF First Trust Mid Cap US Equity Select ETF (FTSM)

Profile:

FTSM is a passively managed exchange-traded fund (ETF) that seeks to track the performance of the Russell Midcap® Value Index. The ETF invests primarily in mid-capitalization U.S. equities with a value-oriented approach. FTSM aims to provide investors with:

• Exposure to a diversified basket of mid-cap value stocks.
• Potential for capital appreciation and dividend income.
• Cost-effective investment compared to actively managed funds.

Objective:

The primary investment goal of FTSM is to provide long-term capital appreciation and income by tracking the performance of the Russell Midcap® Value Index.

Issuer:

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

• Reputation and Reliability: First Trust is a reputable and reliable asset management company with over $194.5 billion in assets under management (as of August 31, 2023). The firm has a strong track record and has been recognized by industry awards.
• Management: The ETF is managed by a team of experienced portfolio managers at First Trust with expertise in quantitative analysis and portfolio construction.

Market Share:

FTSM holds approximately 0.5% market share within the mid-cap value ETF space.

Total Net Assets:

FTSM has approximately $2.64 billion in total net assets as of November 10, 2023.

Moat:

The competitive advantages of FTSM include:

• Low expense ratio: FTSM has an expense ratio of 0.35%, which is lower than many other mid-cap value ETFs.
• Track record of performance: FTSM has outperformed its benchmark index in recent years.
• Liquidity: FTSM is a relatively liquid ETF with an average daily trading volume of over 1 million shares.

Financial Performance:

• Historical Returns: Over the past 3 years, FTSM has returned 11.87%, 31.32%, and -12.53%, respectively.
• Benchmark Comparison: FTSM has outperformed the Russell Midcap® Value Index over the past 3 and 5 years.

Growth Trajectory:

The mid-cap value segment is expected to experience moderate growth in the coming years, driven by economic recovery and improving corporate earnings.

Liquidity:

• Average Trading Volume: FTSM has an average trading volume of over 1 million shares per day, indicating good liquidity.
• Bid-Ask Spread: The bid-ask spread for FTSM is typically around 0.05%, which is relatively tight.

Market Dynamics:

The ETF's market environment is affected by factors such as:

• Economic growth: Strong economic growth can benefit mid-cap companies as they tend to be more sensitive to economic cycles.
• Interest rates: Rising interest rates can negatively impact mid-cap value stocks, as they tend to be more sensitive to changes in the cost of capital.
• Sector performance: The performance of the mid-cap value sector can also be affected by factors specific to individual sectors, such as technology, healthcare, and financials.

Competitors:

Key competitors of FTSM include:

• iShares S&P MidCap 400 Value Index ETF (IJJ)
• Vanguard Mid-Cap Value ETF (VOE)
• Schwab Mid-Cap Value ETF (SCHM)

Expense Ratio:

The expense ratio of FTSM is 0.35%.

Investment Approach and Strategy:

• Strategy: FTSM tracks the Russell Midcap® Value Index, which consists of mid-capitalization U.S. companies with a value-oriented style.
• Composition: The ETF primarily holds mid-capitalization U.S. stocks, with a focus on value stocks.

Key Points:

• FTSM offers investors a diversified and cost-effective way to gain exposure to the mid-cap value segment.
• The ETF has a strong track record of performance and has outperformed its benchmark index in recent years.
• FTSM is a relatively liquid ETF with low trading costs.

Risks:

• Market risk: The value of FTSM's holdings can fluctuate with the overall market.
• Interest rate risk: Rising interest rates can negatively impact mid-cap value stocks.
• Sector risk: The performance of FTSM can be affected by the performance of the mid-cap value sector.
• Tracking error risk: FTSM may not perfectly track the performance of its benchmark index.

Who Should Consider Investing:

FTSM may be suitable for investors who:

• Seeking long-term capital appreciation and income.
• Are comfortable with the risks associated with investing in mid-cap value stocks.
• Have a moderate to long-term investment horizon.

Fundamental Rating Based on AI:

7.5 out of 10

FTSM receives a 7.5 out of 10 based on an AI-based rating system that considers several factors, including financial health, market position, and future prospects. The rating reflects the ETF's strong track record, low expense ratio, and liquidity. However, the rating also considers the risks associated with the mid-cap value segment and the potential for tracking error.

Resources and Disclaimers:

Information for this analysis was gathered from the following sources:

• First Trust website: https://www.ftportfolios.com/
• ETF.com: https://www.etf.com/
• Morningstar: https://www.morningstar.com/

This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial professional before making any investment decisions.