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Is First Trust Natural Gas ETF (FCG) a Strong ETF Right Now?
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Designed to provide broad exposure to the Energy ETFs category of the market, the First Trust Natural Gas ETF (FCG - Free Report) is a smart beta exchange traded fund launched on 05/08/2007.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Managed by First Trust Advisors, FCG has amassed assets over $639.55 million, making it one of the larger ETFs in the Energy ETFs. Before fees and expenses, this particular fund seeks to match the performance of the ISE-REVERE Natural Gas Index.
The ISE-Revere Natural Gas Index is an equal-weighted index comprised of exchange-listed companies that derive a substantial portion of their revenues from the exploration and production of natural gas.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.60% for this ETF, which makes it on par with most peer products in the space.
FCG's 12-month trailing dividend yield is 2.22%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
For FCG, it has heaviest allocation in the Energy sector --about 97.90% of the portfolio.
Looking at individual holdings, Occidental Petroleum Corporation (OXY - Free Report) accounts for about 4.85% of total assets, followed by Conocophillips (COP - Free Report) and Dcp Midstream, Lp .
The top 10 holdings account for about 38.43% of total assets under management.
Performance and Risk
The ETF has gained about 24.41% so far this year and was up about 59.63% in the last one year (as of 07/19/2022). In the past 52-week period, it has traded between $12.34 and $30.82.
The fund has a beta of 2.11 and standard deviation of 54.09% for the trailing three-year period, which makes FCG a high risk choice in this particular space. With about 45 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Natural Gas ETF is an excellent option for investors seeking to outperform the Energy ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
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Is First Trust Natural Gas ETF (FCG) a Strong ETF Right Now?
Designed to provide broad exposure to the Energy ETFs category of the market, the First Trust Natural Gas ETF (FCG - Free Report) is a smart beta exchange traded fund launched on 05/08/2007.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Managed by First Trust Advisors, FCG has amassed assets over $639.55 million, making it one of the larger ETFs in the Energy ETFs. Before fees and expenses, this particular fund seeks to match the performance of the ISE-REVERE Natural Gas Index.
The ISE-Revere Natural Gas Index is an equal-weighted index comprised of exchange-listed companies that derive a substantial portion of their revenues from the exploration and production of natural gas.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.60% for this ETF, which makes it on par with most peer products in the space.
FCG's 12-month trailing dividend yield is 2.22%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
For FCG, it has heaviest allocation in the Energy sector --about 97.90% of the portfolio.
Looking at individual holdings, Occidental Petroleum Corporation (OXY - Free Report) accounts for about 4.85% of total assets, followed by Conocophillips (COP - Free Report) and Dcp Midstream, Lp .
The top 10 holdings account for about 38.43% of total assets under management.
Performance and Risk
The ETF has gained about 24.41% so far this year and was up about 59.63% in the last one year (as of 07/19/2022). In the past 52-week period, it has traded between $12.34 and $30.82.
The fund has a beta of 2.11 and standard deviation of 54.09% for the trailing three-year period, which makes FCG a high risk choice in this particular space. With about 45 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Natural Gas ETF is an excellent option for investors seeking to outperform the Energy ETFs segment of the market. There are other ETFs in the space which investors could consider as well.