Should First Trust Large Cap Growth AlphaDEX ETF (FTC) Be on Your Investing Radar?

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If you’re interested in broad exposure to the Large Cap Growth segment of the US equity market, look no further than the First Trust Large Cap Growth AlphaDEX ETF (FTC), a passively managed exchange traded fund launched on 05/08/2007.

The fund is sponsored by First Trust Advisors. It has amassed assets over $1.30 billion, making it one of the average sized ETFs attempting to match the Large Cap Growth segment of the US equity market.

Why Large Cap Growth

Companies that find themselves in the large cap category typically have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.

Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. They are likely to outperform value stocks in strong bull markets but over the longer-term, value stocks have delivered better returns than growth stocks in almost all markets.

Costs

Investors should also pay attention to an ETF’s expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.59%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund’s holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector–about 32.20% of the portfolio. Healthcare and Consumer Discretionary round out the top three.

Looking at individual holdings, Cloudflare, Inc. (class A) (NET) accounts for about 1.37% of total assets, followed by Hubspot, Inc. (HUBS) and Cheniere Energy, Inc. (LNG).

The top 10 holdings account for about 10.04% of total assets under management.

Performance and Risk

FTC seeks to match the performance of the Nasdaq AlphaDEX Large Cap Growth Index before fees and expenses. The NASDAQ AlphaDEX Large Cap Growth Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Growth Index.

The ETF has gained about 0% so far this year and it’s up approximately 22.81% in the last one year (as of 01/04/2022). In the past 52-week period, it has traded between $91.91 and $124.15.

The ETF has a beta of 1.02 and standard deviation of 24.45% for the trailing three-year period, making it a medium risk choice in the space. With about 188 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Large Cap Growth AlphaDEX ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FTC is an outstanding option for investors seeking exposure to the Style Box – Large Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.

The Vanguard Growth ETF (VUG) and the Invesco QQQ (QQQ) track a similar index. While Vanguard Growth ETF has $90.73 billion in assets, Invesco QQQ has $217.55 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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First Trust Large Cap Growth AlphaDEX ETF (FTC): ETF Research Reports
 
Cheniere Energy, Inc. (LNG) : Free Stock Analysis Report
 
Invesco QQQ (QQQ): ETF Research Reports
 
HubSpot, Inc. (HUBS) : Free Stock Analysis Report
 
Vanguard Growth ETF (VUG): ETF Research Reports
 
Cloudflare, Inc. (NET) : Free Stock Analysis Report
 
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