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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) was launched on 05/08/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Energy ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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.
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. FCG has been able to amass assets over $565.70 million, making it one of the larger ETFs in the Energy ETFs. This particular fund seeks to match the performance of the ISE-REVERE Natural Gas Index before fees and expenses.
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.
FCG's 12-month trailing dividend yield is 3.43%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. 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 98.40% of the portfolio.
When you look at individual holdings, Hess Midstream Lp (class A) (HESM - Free Report) accounts for about 4.56% of the fund's total assets, followed by Western Midstream Partners Lp (WES - Free Report) and Conocophillips (COP - Free Report) .
Its top 10 holdings account for approximately 34.99% of FCG's total assets under management.
Performance and Risk
So far this year, FCG has gained about 8.57%, and was up about 3.27% in the last one year (as of 08/21/2023). During this past 52-week period, the fund has traded between $20.73 and $28.53.
The fund has a beta of 1.97 and standard deviation of 42.85% for the trailing three-year period, which makes FCG a high risk choice in this particular space. With about 52 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Natural Gas ETF is not a suitable option for investors seeking to outperform the Energy ETFs segment of the market. Instead, there are other ETFs in the space which investors should 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) was launched on 05/08/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Energy ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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.
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. FCG has been able to amass assets over $565.70 million, making it one of the larger ETFs in the Energy ETFs. This particular fund seeks to match the performance of the ISE-REVERE Natural Gas Index before fees and expenses.
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.
FCG's 12-month trailing dividend yield is 3.43%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. 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 98.40% of the portfolio.
When you look at individual holdings, Hess Midstream Lp (class A) (HESM - Free Report) accounts for about 4.56% of the fund's total assets, followed by Western Midstream Partners Lp (WES - Free Report) and Conocophillips (COP - Free Report) .
Its top 10 holdings account for approximately 34.99% of FCG's total assets under management.
Performance and Risk
So far this year, FCG has gained about 8.57%, and was up about 3.27% in the last one year (as of 08/21/2023). During this past 52-week period, the fund has traded between $20.73 and $28.53.
The fund has a beta of 1.97 and standard deviation of 42.85% for the trailing three-year period, which makes FCG a high risk choice in this particular space. With about 52 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Natural Gas ETF is not a suitable option for investors seeking to outperform the Energy ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.