Profit from Natural Gas with This Fund

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

The energy sector is one that has been in and out of favor in recent years. That means that investors who successfully time a return to the sector could be in for serious potential profits. The sector can be volatile at times, which can be a blessing, or a curse, and may reward disciplined investors.

For a slightly less traditional approach to energy, consider First Trust Natural Gas ETF (FCG). This exchange-traded fund (ETF) offers dedicated exposure to the natural gas subsector. Companies selected for inclusion need not necessarily do business only in natural gas, but all are connected to it in some way.

The fund also has a cap on its exposure to master limited partnerships (MLPs). FCG is weighted by market cap, so it provides access primarily to larger companies. That said, the energy sector isn’t all about the mega caps; a fairly large percentage of the fund is still accounted for by small- and mid-cap stocks. It invests almost exclusively in domestic equities.

FCG’s performance in the last year has been stellar. The fund’s price has nearly tripled in that time – up more than 180%. And that doesn’t include the bonus of its 1.61% yield, which is more than sufficient to cover a moderate expense ratio of 0.60%. Its assets total more than $510 million, and it is fairly liquid.

Chart courtesy of StockCharts.com

The top 10 holdings of FCG hold a high 42.64% of its assets. These include ConocoPhillips (COP), 4.54%; EOG Resources, Inc. (EOG), 4.47%; Pioneer Natural Resources Co. (PXD), 4.36%; Devon Energy Co. (DVN), 4.35%; and Diamondback Energy, Inc. (FANG), 4.27%. There are just 41 holdings in total, which make it more selective than broader energy ETFs. FCG’s strategy has produced superior returns in recent periods.

If you think now is the time to try investing in natural gas companies, First Trust Natural Gas ETF (FCG) may be a compelling way of doing so.

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In September 2020, I presented you with a guest editorial by my very good friend, writer, filmmaker and intellectual activist Stewart Wade Margolis. Stewart has been my friend and fellow advocate for a reason since our days together at UCLA. He’s also been a guest on my podcast, Way of the Renaissance

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