Exchange Traded Funds (ETFs)

Invest in Natural Gas

First Trust Natural Gas ETF (FCG) is a straightforward exchange-traded fund (ETF) which invests in the natural gas space.

It can include companies involved in the exploration, as well as the production side of the natural gas business. FCG was the first fund on the market offering this type of exposure in 2007.

Master limited partnerships (MLPs), publicly listed limited partnerships that trade on a national securities exchange, are limited to 15% of FCG’s portfolio, and the fund’s holdings are chosen and weighted by market cap and daily trading volume.

Those who have paid attention to the fortunes of the energy sector in recent times may not be surprised to learn that FCG is up 53.14% over the last year. This rise represents quite a windfall for its investors, particularly given the underwhelming performance of the overall market during the same period, with the S&P 500 down 15%. At a peak around June, the fund was up 90% for the year. Performance in the latter half of the year has been mixed.

Though FCG, like the energy market at large, has not yet recovered to the heights it held when the sector was more in favor, it may now represent an opportunity. It offers a 2.6% dividend yield, and its expense ratio is 0.60%. Assets under management total $897 million.

Chart courtesy of www.StockCharts.com

The fund currently holds a total of 52 companies, most based in the United States. Among the largest positions are Hess Midstream LP (HESM), 5.05%; DCP Midstream LP (DCP), 4.93%; Western Midstream Partners LP (WES), 4.54%; ConocoPhillips (COP), 3.96%; and EOG Resources, Inc. (EOG), 3.86%. The top 10 holdings account for 40% of the fund’s assets.

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As always, investors should consider the fund’s features carefully and weigh what its holdings have to offer before adding it to their portfolios. First Trust Natural Gas ETF (FCG) represents a simple approach to investing in natural gas and companies in that industry.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.