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Is First Trust Natural Gas ETF (FCG) a Strong ETF Right Now?
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Launched on 05/08/2007, the First Trust Natural Gas ETF (FCG - Free Report) is a smart beta exchange traded fund offering broad exposure to the Energy ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $931.36 million, making it one of the larger ETFs in the Energy ETFs. Before fees and expenses, FCG 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.60%, making it on par with most peer products in the space.
FCG's 12-month trailing dividend yield is 1.93%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 98.10% of the portfolio, the fund has heaviest allocation to the Energy sector.
Looking at individual holdings, Western Midstream Partners Lp (WES - Free Report) accounts for about 4.88% of total assets, followed by Dcp Midstream, Lp and Hess Midstream Lp (class A) (HESM - Free Report) .
The top 10 holdings account for about 38.33% of total assets under management.
Performance and Risk
So far this year, FCG has added about 42.79%, and it's up approximately 76.08% in the last one year (as of 09/21/2022). During this past 52-week period, the fund has traded between $15.14 and $30.82.
The ETF has a beta of 2.03 and standard deviation of 53.58% for the trailing three-year period, making it a high risk choice in the space. With about 50 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?
Launched on 05/08/2007, the First Trust Natural Gas ETF (FCG - Free Report) is a smart beta exchange traded fund offering broad exposure to the Energy ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $931.36 million, making it one of the larger ETFs in the Energy ETFs. Before fees and expenses, FCG 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.60%, making it on par with most peer products in the space.
FCG's 12-month trailing dividend yield is 1.93%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 98.10% of the portfolio, the fund has heaviest allocation to the Energy sector.
Looking at individual holdings, Western Midstream Partners Lp (WES - Free Report) accounts for about 4.88% of total assets, followed by Dcp Midstream, Lp and Hess Midstream Lp (class A) (HESM - Free Report) .
The top 10 holdings account for about 38.33% of total assets under management.
Performance and Risk
So far this year, FCG has added about 42.79%, and it's up approximately 76.08% in the last one year (as of 09/21/2022). During this past 52-week period, the fund has traded between $15.14 and $30.82.
The ETF has a beta of 2.03 and standard deviation of 53.58% for the trailing three-year period, making it a high risk choice in the space. With about 50 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.