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Should You Invest in the First Trust Natural Gas ETF (FCG)?

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The First Trust Natural Gas ETF (FCG) was launched on 05/08/2007, and is a passively managed exchange traded fund designed to offer broad exposure to the Energy - Natural Gas segment of the equity market.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy - Natural Gas is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 7, placing it in top 44%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $439.78 million, making it one of the larger ETFs attempting to match the performance of the Energy - Natural Gas segment of the equity market. FCG 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.

Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.60%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.64%.

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.

This ETF has heaviest allocation in the Energy sector--about 100% of the portfolio.

Looking at individual holdings, Dcp Midstream, Lp (DCP) accounts for about 4.98% of total assets, followed by Devon Energy Corporation (DVN) and Western Midstream Partners Lp (WES).

The top 10 holdings account for about 43.78% of total assets under management.

Performance and Risk

So far this year, FCG return is roughly 101.96%, and was up about 185.52% in the last one year (as of 10/08/2021). During this past 52-week period, the fund has traded between $5.99 and $18.12.

The ETF has a beta of 2.48 and standard deviation of 52.13% for the trailing three-year period, making it a high risk choice in the space. With about 39 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust Natural Gas ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FCG is an excellent option for investors seeking exposure to the Energy ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.


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First Trust Natural Gas ETF (FCG): ETF Research Reports
 
Devon Energy Corporation (DVN) : Free Stock Analysis Report
 
Western Midstream Partners, LP (WES) : Free Stock Analysis Report
 
DCP Midstream Partners, LP (DCP) : Free Stock Analysis Report
 
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