Commodities and Gold

Profit from Natural Gas with This Fund

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.

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 Intelligence Report, Investing Edge, 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.