As natural gas climbs, ETF investors can get energy exposure with a small cap twist using the Invesco S&P SmallCap Energy ETF (PSCE).
It’s one way for investors to get indirect exposure to natural gas, which has been on the move higher as indicated by the Bloomberg Natural Gas Subindex. The index is up about 21% for the year and could keep rising if natural gas prices can break out.
PSCE’s top holdings—PDC Energy Inc, Range Resources Corp, and Matador Resources Co—all feature companies that engage in the exploration, development, and/or production of natural gas.
PSCE seeks to track the investment results of the S&P SmallCap 600® Capped Energy Index. The fund generally will invest at least 90% of its total assets in the securities of small-capitalization U.S. energy companies that comprise the underlying index.
These companies are principally engaged in the business of producing, distributing, or servicing energy-related products, including oil and gas exploration and production, refining, oil services, and pipelines. The fund’s expense ratio comes in at 0.29%, which is a relative bargain given its category average of 0.47%.
A Heavier Reliance on Natural Gas
As the previous chart shows, PSCE is up close to 90% for the year. Heavier reliance on natural gas could ensue in the short-term, giving natural gas prices more tailwinds.
“The Western United States will likely depend more heavily on natural gas to generate electricity in the near-term, according to one of Rigzone’s regular market prognosticators,” a Rigzone article said, highlighting the views of market experts in the natural gas space.
“West Coast gas prices continue to climb. Drought in certain areas of the western U.S. is reducing hydro capacity, which is a major provider of consistent base load power in those regions,” said Mark Le Dain, vice president of strategy with the oil and gas data firm Validere. “Natural gas will be a larger part of the power stack in the regions and, as summer heat forecasts come in, we could see this really climb in combination with this dynamic.”
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