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Is First Trust NASDAQ Oil & Gas ETF (FTXN) a Strong ETF Right Now?

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A smart beta exchange traded fund, the First Trust NASDAQ Oil & Gas ETF (FTXN - Free Report) debuted on 09/20/2016, 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.

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.

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

The fund is managed by First Trust Advisors. FTXN has been able to amass assets over $1.17 billion, making it one of the larger ETFs in the Energy ETFs. Before fees and expenses, FTXN seeks to match the performance of the Nasdaq US Smart Oil & Gas Index.

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.

Cost & Other Expenses

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

Annual operating expenses for FTXN are 0.60%, which makes it on par with most peer products in the space.

FTXN's 12-month trailing dividend yield is 2.35%.

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 100% of the portfolio, the fund has heaviest allocation to the Energy sector.

Looking at individual holdings, Pbf Energy Inc. (PBF - Free Report) accounts for about 9% of total assets, followed by Occidental Petroleum Corporation (OXY - Free Report) and Chevron Corporation (CVX - Free Report) .

The top 10 holdings account for about 56.69% of total assets under management.

Performance and Risk

So far this year, FTXN has lost about -3.76%, and it's up approximately 34.49% in the last one year (as of 01/06/2023). During this past 52-week period, the fund has traded between $21.05 and $31.70.

The ETF has a beta of 1.43 and standard deviation of 45.50% for the trailing three-year period. With about 50 holdings, it has more concentrated exposure than peers.


First Trust NASDAQ Oil & 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.

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 $8.45 billion in assets, Energy Select Sector SPDR ETF has $40.15 billion. VDE has an expense ratio of 0.10% and XLE charges 0.10%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Energy ETFs.

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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