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First Trust Active Factor Mid Cap ETF earns a buy rating for its multi-factor, actively managed approach and consistent outperformance versus mid-cap peers. AFMC's portfolio emphasizes value momentum stocks in industrials and technology, limiting exposure to rate-sensitive sectors and supporting robust, market-beating returns. AFMC trades at a forward P/E of 15x, below peer ETFs, and maintains strong liquidity, though its 0.65% expense ratio and 0.70% yield lag competitors.
I initiate coverage on the First Trust Active Factor Mid Cap ETF, assigning a 'hold' rating due to cautious optimism. AFMC's multi-factor approach—value, momentum, quality, and low volatility—has recently outperformed IJH, especially by leveraging momentum. Despite a high 0.68% expense ratio and bid/ask spread, AFMC offers strong GARP characteristics with a top-decile modified PEG ratio.
AI-related equity jitters are unlikely to be resolved overnight and eurozone government bonds could actually come out as a winner. Relative to euro rates, US equity volatility is reaching highs similar to previous crisis periods. A global rebalancing of portfolios could see significant demand for euro rates, mitigating the upward rate pressure.