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Is First Trust Natural Gas ETF (FCG) a Strong ETF Right Now?
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A smart beta exchange traded fund, the First Trust Natural Gas ETF (FCG - Free Report) debuted on 05/08/2007, and offers broad exposure to the Energy ETFs category of the market.
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.
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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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
FCG is managed by First Trust Advisors, and this fund has amassed over $814.52 million, which makes 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for FCG are 0.60%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 3.04%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
FCG's heaviest allocation is in the Energy sector, which is about 98.50% of the portfolio.
Looking at individual holdings, Dcp Midstream, Lp accounts for about 5.16% of total assets, followed by Western Midstream Partners Lp (WES - Free Report) and Hess Midstream Lp (class A) (HESM - Free Report) .
The top 10 holdings account for about 39.14% of total assets under management.
Performance and Risk
The ETF has lost about -0.20% and is up roughly 25.08% so far this year and in the past one year (as of 02/02/2023), respectively. FCG has traded between $19.57 and $30.82 during this last 52-week period.
The ETF has a beta of 1.97 and standard deviation of 53.85% for the trailing three-year period, making it a high risk choice in the space. With about 52 holdings, it effectively diversifies company-specific risk.
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?
A smart beta exchange traded fund, the First Trust Natural Gas ETF (FCG - Free Report) debuted on 05/08/2007, and offers broad exposure to the Energy ETFs category of the market.
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.
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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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
FCG is managed by First Trust Advisors, and this fund has amassed over $814.52 million, which makes 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for FCG are 0.60%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 3.04%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
FCG's heaviest allocation is in the Energy sector, which is about 98.50% of the portfolio.
Looking at individual holdings, Dcp Midstream, Lp accounts for about 5.16% of total assets, followed by Western Midstream Partners Lp (WES - Free Report) and Hess Midstream Lp (class A) (HESM - Free Report) .
The top 10 holdings account for about 39.14% of total assets under management.
Performance and Risk
The ETF has lost about -0.20% and is up roughly 25.08% so far this year and in the past one year (as of 02/02/2023), respectively. FCG has traded between $19.57 and $30.82 during this last 52-week period.
The ETF has a beta of 1.97 and standard deviation of 53.85% for the trailing three-year period, making it a high risk choice in the space. With about 52 holdings, it effectively diversifies company-specific risk.
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.