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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?
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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option 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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FCG has been able to amass assets over $743.59 million, making it one of the larger ETFs in the Energy ETFs. This particular fund, before fees and expenses, 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.60%.
The fund has a 12-month trailing dividend yield of 1.56%.
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 98.10% of the portfolio, the fund has heaviest allocation to the Energy sector.
Taking into account individual holdings, Occidental Petroleum Corporation (OXY - Free Report) accounts for about 4.85% of the fund's total assets, followed by Conocophillips (COP - Free Report) and Dcp Midstream, Lp .
Its top 10 holdings account for approximately 38.43% of FCG's total assets under management.
Performance and Risk
Year-to-date, the First Trust Natural Gas ETF has added roughly 37.49% so far, and is up about 83.31% over the last 12 months (as of 05/16/2022). FCG has traded between $12.34 and $26.84 in this past 52-week period.
The fund has a beta of 2.09 and standard deviation of 52.95% for the trailing three-year period, which makes FCG a high risk choice in this particular space. With about 45 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?
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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option 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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FCG has been able to amass assets over $743.59 million, making it one of the larger ETFs in the Energy ETFs. This particular fund, before fees and expenses, 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.60%.
The fund has a 12-month trailing dividend yield of 1.56%.
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 98.10% of the portfolio, the fund has heaviest allocation to the Energy sector.
Taking into account individual holdings, Occidental Petroleum Corporation (OXY - Free Report) accounts for about 4.85% of the fund's total assets, followed by Conocophillips (COP - Free Report) and Dcp Midstream, Lp .
Its top 10 holdings account for approximately 38.43% of FCG's total assets under management.
Performance and Risk
Year-to-date, the First Trust Natural Gas ETF has added roughly 37.49% so far, and is up about 83.31% over the last 12 months (as of 05/16/2022). FCG has traded between $12.34 and $26.84 in this past 52-week period.
The fund has a beta of 2.09 and standard deviation of 52.95% for the trailing three-year period, which makes FCG a high risk choice in this particular space. With about 45 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.