Unseasonably warm weather across the U.S. has kept natural gas futures-based exchange traded funds firmly depressed. ETF investors, though, may opt to gain exposure to the natural gas equities side as a less risky play on the natural gas market.
With oversupply concerns still weighing on the futures market, funds such as the U.S. Natural Gas Fund (UNG) and iPath Natural Gas Total Return ETN (GAZ) may be better suited as a gauge of the markets, writes Don Dion for TheStreet. [Warm Weather Saps Natural Gas ETFs]
However, an ETF linked to natural gas-related equities may be a better investment idea as producers continue to expand within the energy sector. [ET For instance, Chevron (NYSE: CVX recently revealed that it will go forward with its own shale natural gas production, expanding into the Marcellus Shale formation, despite the low gas prices, according to a Wall Street Journal article.
The First Trust ISE-Revere Natural Gas Index Fund (FCG) provides investors with the opportunity to gain broad exposure to producers engaged in the production of natural gas. For example, top holdings include Stone Energy (SGY) (4.2%), Cimarex Energy (XEC) (4.1%) and EOG Resources (EOG) (3.8%).
FCG has gained 1.5% year-to-date. In comparison, UNG dropped 30.7% year-to-date as natural gas prices have fallen to $2.2.
First Trust ISE-Revere Natural Gas Index Fund
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Max Chen contributed to this article.
Disclosure: I am long UNG.
Additional disclosure: Tom's clients own UNG.