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Should You Invest in the First Trust NASDAQ Oil & Gas ETF (FTXN)?

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Looking for broad exposure to the Energy - Broad segment of the equity market? You should consider the First Trust NASDAQ Oil & Gas ETF (FTXN - Free Report) , a passively managed exchange traded fund launched on 09/20/2016.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 6, placing it in top 38%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $837.31 million, making it one of the larger ETFs attempting to match the performance of the Energy - Broad segment of the equity market. FTXN seeks to match the performance of the Nasdaq US Smart Oil & Gas Index before fees and expenses.

The Nasdaq US Smart Oil & Gas Index is a modified factor weighted index, designed to provide exposure to US companies within the oil and gas industry.

Costs

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.

Annual operating expenses for this ETF are 0.60%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.18%.

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.

This ETF has heaviest allocation in the Energy sector--about 100% of the portfolio.

Looking at individual holdings, Sm Energy Company (SM - Free Report) accounts for about 9.84% of total assets, followed by Centennial Resource Development, Inc (class A) (CDEV - Free Report) and Cheniere Energy, Inc. (LNG - Free Report) .

The top 10 holdings account for about 60.06% of total assets under management.

Performance and Risk

The ETF return is roughly 61.32% so far this year and was up about 57.07% in the last one year (as of 12/20/2021). In that past 52-week period, it has traded between $11.39 and $21.73.

The ETF has a beta of 1.68 and standard deviation of 41.05% for the trailing three-year period. With about 50 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust NASDAQ Oil & Gas ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FTXN is a reasonable option for those seeking exposure to the Energy ETFs area of the market. Investors might also want to consider some other ETF options in the space.

Vanguard Energy ETF (VDE - Free Report) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR ETF (XLE - Free Report) tracks Energy Select Sector Index. Vanguard Energy ETF has $5.67 billion in assets, Energy Select Sector SPDR ETF has $25.23 billion. VDE has an expense ratio of 0.10% and XLE charges 0.12%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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