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Is First Trust Natural Gas ETF (FCG) a Strong ETF Right Now?
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The First Trust Natural Gas ETF (FCG - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Energy ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
The fund is sponsored by First Trust Advisors. It has amassed assets over $504.87 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
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.
Operating expenses on an annual basis are 0.60% for FCG, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 3.71%.
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 98.40% of the portfolio.
Taking into account individual holdings, Hess Midstream Lp (class A) (HESM - Free Report) accounts for about 4.87% of the fund's total assets, followed by Western Midstream Partners Lp (WES - Free Report) and Occidental Petroleum Corporation (OXY - Free Report) .
Its top 10 holdings account for approximately 38.64% of FCG's total assets under management.
Performance and Risk
The ETF has lost about -8.22% so far this year and is down about -21.80% in the last one year (as of 06/06/2023). In the past 52-week period, it has traded between $20.41 and $30.82.
The ETF has a beta of 1.97 and standard deviation of 45.35% for the trailing three-year period, making it a high risk choice in the space. With about 49 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?
The First Trust Natural Gas ETF (FCG - Free Report) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Energy ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
The fund is sponsored by First Trust Advisors. It has amassed assets over $504.87 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
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.
Operating expenses on an annual basis are 0.60% for FCG, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 3.71%.
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 98.40% of the portfolio.
Taking into account individual holdings, Hess Midstream Lp (class A) (HESM - Free Report) accounts for about 4.87% of the fund's total assets, followed by Western Midstream Partners Lp (WES - Free Report) and Occidental Petroleum Corporation (OXY - Free Report) .
Its top 10 holdings account for approximately 38.64% of FCG's total assets under management.
Performance and Risk
The ETF has lost about -8.22% so far this year and is down about -21.80% in the last one year (as of 06/06/2023). In the past 52-week period, it has traded between $20.41 and $30.82.
The ETF has a beta of 1.97 and standard deviation of 45.35% for the trailing three-year period, making it a high risk choice in the space. With about 49 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.