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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?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
A good option for investors who believe in market efficiency, market cap weighted indexes offer 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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Managed by First Trust Advisors, FCG has amassed assets over $627.44 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
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.
Operating expenses on an annual basis are 0.60% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.36%.
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.
When you look at individual holdings, Western Midstream Partners Lp (WES - Free Report) accounts for about 4.68% of the fund's total assets, followed by Conocophillips (COP - Free Report) and Occidental Petroleum Corporation (OXY - Free Report) .
FCG's top 10 holdings account for about 42.56% of its total assets under management.
Performance and Risk
The ETF has added roughly 22.69% so far this year and is up about 57.87% in the last one year (as of 03/15/2022). In the past 52-week period, it has traded between $12.02 and $23.59.
The fund has a beta of 2.22 and standard deviation of 52.28% for the trailing three-year period, which makes FCG a high risk choice in this particular space. With about 44 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Natural Gas ETF is a reasonable option for investors seeking to outperform the Energy ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
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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?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
A good option for investors who believe in market efficiency, market cap weighted indexes offer 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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Managed by First Trust Advisors, FCG has amassed assets over $627.44 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
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.
Operating expenses on an annual basis are 0.60% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.36%.
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.
When you look at individual holdings, Western Midstream Partners Lp (WES - Free Report) accounts for about 4.68% of the fund's total assets, followed by Conocophillips (COP - Free Report) and Occidental Petroleum Corporation (OXY - Free Report) .
FCG's top 10 holdings account for about 42.56% of its total assets under management.
Performance and Risk
The ETF has added roughly 22.69% so far this year and is up about 57.87% in the last one year (as of 03/15/2022). In the past 52-week period, it has traded between $12.02 and $23.59.
The fund has a beta of 2.22 and standard deviation of 52.28% for the trailing three-year period, which makes FCG a high risk choice in this particular space. With about 44 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust Natural Gas ETF is a reasonable option for investors seeking to outperform the Energy ETFs segment of the market. However, there are other ETFs in the space which investors could consider.