Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you’d like to add some natural-gas-related stocks to your portfolio, the First Trust ISE-Revere Natural Gas Index could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The First Trust ETF’s expense ratio — its annual fee — is 0.60%.
This ETF has performed poorly in recent years, losing to the world market over the past three and five years. As with most investments, of course, we can’t expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver. And it’s the future that counts more than the past, as well.
Why natural gas?
Energy is a critical staple, and natural gas has increasingly become an important part of the energy industry. Its recent low prices have helped spur interest in it, though that has also caused some natural-gas companies some grief. Still, the low prices won’t last forever, and there’s a lot of potential in these companies, especially as many of them expand their non-gas operations.
More than a handful of natural-gas-related companies struggled over the past year. Magnum Hunter Resources Corp (NYSE:MHR) sank 44%, for example, and that actually represents a big rebound from earlier lows. It’s heavily shorted, in part due to significant debt and a substantial focus on natural gas in its operations. Some don’t appreciate its shift toward oil and liquids, though, and its diversification across several promising shale fields.
SandRidge Energy Inc. (NYSE:SD) shed 29%, fighting activist investors, and selling off some assets to raise funds and invest more in the Mississippi Lime field. Bulls are hopeful about its prospects there, while bears might not like seeing so many eggs in that one basket, and many of them see the company as still overvalued, too.