Under The Hood: A Very Versatile Energy ETF

We've been scouring the world of equity-based commodities ETFs this week, a fun and potentially profitable endeavor to be sure. The fun part comes from unearthing some funds with hidden gem potential or under-the-radar plays. Fortunately, the energy patch is a good place to find these types of ETFs because, as we've been saying for a while now, ETFs like the Energy Select Sector SPDR XLE and the iShares Dow Jones US Oil Equipment Index Fund IEZ dominate the energy ETF conversation. A lot of power in the hands of a few is kind of how energy ETFs shape up. That's why we were kind of excited to stumble upon the First Trust Energy AlphaDEX ETF FXN, which we already had some kind words for. FXN has been around for about 4.5 years and has decent standing with more than $95 million in assets under management. Admittedly, FXN's 0.7% expense ratio is high for this genre of sector funds, but there are advantages to this ETF. Home to 55 stocks, FXN doesn't feature excessive weights to just one or two stocks the way XLE does. Additionally, FXN mixes obscure and well-known oil names better than most rival funds. The ETF's top-five holdings are Unit UNT, Marathon Oil MRO, Murphy Oil MUR, Apache APA and Marathon Petroleum MPC. That sampling only gives investors a glimpse of FXN's versatility. On the surface, this ETF appears to be just about oil producers. That's far from the truth. Remember what we said on Wednesday: The First Trust Energy AlphaDEX ETF a “killing multiple birds with one stone” ETF. Integrated oil companies? Check. Independent oil producers? Check. Oil services providers? Check. Coal producers? Check. Refiners? Check. FXN does all that with 55 stocks. Other FXN holdings include Alpha Natural Resources ANR, National Oilwell Varco (NYSE NOV) and Tesoro TSO. FXN is down about 4.1% year-to-date, but things have been looking for the unheralded ETF in recent days. In fact, FXN is up almost 10% in the past five trading days. A move above the 200-day line at $22 would be an encouraging near-term signal to get involved with FXN. Bull case: Oil prices keep climbing. Coal stocks start getting it together. Consolidation among refiners and oil services names would help. Bear case: None of the aforementioned scenarios come to pass.