Should You Invest in the First Trust NASDAQ Oil & Gas ETF (FTXN)?

Looking for broad exposure to the Energy – Broad segment of the equity market? You should consider the First Trust NASDAQ Oil & Gas ETF (FTXN), a passively managed exchange traded fund launched on 09/20/2016.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy – Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 1, placing it in top 6%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $1.24 billion, making it one of the larger ETFs attempting to match the performance of the Energy – Broad segment of the equity market. FTXN seeks to match the performance of the Nasdaq US Smart Oil & Gas Index before fees and expenses.

The Nasdaq US Smart Oil & Gas Index is a modified factor weighted index, designed to provide exposure to US companies within the oil and gas industry.

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 1.51%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund’s holdings before investing. Luckily, 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, Pbf Energy Inc. (PBF) accounts for about 9% of total assets, followed by Occidental Petroleum Corporation (OXY) and Chevron Corporation (CVX).

The top 10 holdings account for about 56.69% of total assets under management.

Performance and Risk

So far this year, FTXN has added roughly 51.56%, and was up about 44.54% in the last one year (as of 10/31/2022). During this past 52-week period, the fund has traded between $18.42 and $31.70.

The ETF has a beta of 1.42 and standard deviation of 44.89% for the trailing three-year period. With about 50 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust NASDAQ Oil & 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, FTXN is an outstanding 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.

Vanguard Energy ETF (VDE) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR ETF (XLE) tracks Energy Select Sector Index. Vanguard Energy ETF has $8.63 billion in assets, Energy Select Sector SPDR ETF has $42.43 billion. VDE has an expense ratio of 0.10% and XLE charges 0.10%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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First Trust NASDAQ Oil & Gas ETF (FTXN): ETF Research Reports
 
Chevron Corporation (CVX) : Free Stock Analysis Report
 
Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report
 
Energy Select Sector SPDR ETF (XLE): ETF Research Reports
 
PBF Energy Inc. (PBF) : Free Stock Analysis Report
 
Vanguard Energy ETF (VDE): ETF Research Reports
 
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Zacks Investment Research

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