An ETF that invests in natural gas producers has rallied above its 50-day moving average on speculation the commodity has finally hit bottom and that companies will benefit from higher prices.
First Trust ISE-Revere Natural Gas Index Fund (NYSEArca: FCG) was on a seven-day winning streak heading into Wednesday’s action, gaining about 10% during the period. [ETF Chart of the Day: Natural Gas Producers]
FCG is different from most natural gas exchange traded products because it follows stocks, rather than natural gas futures. [ETFs for Natural Gas]
Because it invests in producers, FCG avoids some of the issues that can impact natural gas futures products, such as contango and premiums to net asset value. [Natural Gas ETN Premium Tops 100%]
Natural gas prices bounced during the second half of April and investors are wondering if the commodity is poised to recover after trending steadily lower for several years.
Noted investor Jeffrey Gundlach at DoubleLine Capital made waves last month on reports he saw an attractive buying opportunity in natural gas. Buying the commodity is similar to purchasing gold in 1997 before the big rally in the precious metal, Gundlach said, Bloomberg News reported.
In April, natural gas prices hit the lowest levels in a decade. [Natural Gas ETF Bounces]
The tracking index for FCG is ISE-Revere Natural Gas Index. The benchmark is an equal-weighted index comprised of exchange-listed companies that derive a substantial portion of their revenues from the exploration and production of natural gas, according to manager First Trust. The ETF has total assets of $377 million.
First Trust ISE-Revere Natural Gas Index Fund
The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.