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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?
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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $572.96 million, which makes it one of the average sized ETFs in the Energy ETFs. Before fees and expenses, this particular fund 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.
Annual operating expenses for FCG are 0.60%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 3.52%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
For FCG, it has heaviest allocation in the Energy sector --about 98.40% of the portfolio.
Taking into account individual holdings, Dcp Midstream, Lp accounts for about 5.16% of the fund's total assets, followed by Western Midstream Partners Lp (WES - Free Report) and Hess Midstream Lp (class A) (HESM - Free Report) .
The top 10 holdings account for about 39.14% of total assets under management.
Performance and Risk
So far this year, FCG has lost about -3.16%, and is down about -0.66% in the last one year (as of 04/06/2023). During this past 52-week period, the fund has traded between $20.41 and $30.82.
The fund has a beta of 1.96 and standard deviation of 47.75% 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 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) 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?
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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $572.96 million, which makes it one of the average sized ETFs in the Energy ETFs. Before fees and expenses, this particular fund 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.
Annual operating expenses for FCG are 0.60%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 3.52%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
For FCG, it has heaviest allocation in the Energy sector --about 98.40% of the portfolio.
Taking into account individual holdings, Dcp Midstream, Lp accounts for about 5.16% of the fund's total assets, followed by Western Midstream Partners Lp (WES - Free Report) and Hess Midstream Lp (class A) (HESM - Free Report) .
The top 10 holdings account for about 39.14% of total assets under management.
Performance and Risk
So far this year, FCG has lost about -3.16%, and is down about -0.66% in the last one year (as of 04/06/2023). During this past 52-week period, the fund has traded between $20.41 and $30.82.
The fund has a beta of 1.96 and standard deviation of 47.75% 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 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.