FRTY: A Focused Mid-Cap Growth ETF Throwing Caution To The Wind

Summary

• Alger Mid Cap 40 ETF is a focused mid-cap growth ETF comprised of 40 U.S. stocks undergoing 'Positive Dynamic Change.' Its ER is 0.60% after waivers, and the ETF has $85 million in AUM.
• FRTY's current holdings are increasing sales at a faster rate than they were three and five years ago, making the fund a standout among nearly all U.S. equity ETFs.
• The Fund's strategy appears reckless. I calculated a 1.60 five-year portfolio beta, a 36.56x forward P/E ratio, and a weighted average ROE that's substantially lower than its peers.
• Despite strong current momentum features, Alger clearly didn't hold these stocks before their big run-ups. Notably, it's been the worst-performing fund in its category since its launch four years ago.
• There are too many red flags to justify buying FRTY, so I'm confidently rating it a 'Sell' and recommend readers look into the four other mid-cap growth ETFs highlighted in this article.

Nico De Pasquale Photography

Investment Thesis

The Alger Mid Cap 40 ETF (NYSEARCA:FRTY) is a highly aggressive and concentrated mid-cap growth ETF comprised mainly speculative names trading at excessive valuations. FRTY's 0.60% expense ratio (1.14% before waivers) doesn't help shareholders on the cost front, and

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