First Trust Exchange-Traded Fund II - First Trust Alerian U.S. NextGen Infrastructure ETF (RBLD)

ETF First Trust Exchange-Traded Fund II - First Trust Alerian U.S. NextGen Infrastructure ETF (NYSEARCA: CNGI)

Profile:

This ETF focuses on the NextGen infrastructure sector, targeting companies that are involved in the development, ownership, and operation of next-generation infrastructure assets in the U.S. These assets include:

• Renewable energy generation and storage: solar, wind, hydroelectric, geothermal, and battery storage.
• Digital infrastructure: data centers, fiber optic networks, and cell towers.
• Sustainable transportation: electric vehicle charging stations, high-speed rail, and intelligent transportation systems.

The ETF employs a passively managed strategy, tracking the Alerian US NextGen Infrastructure Index.

Objective:

The primary investment goal of this ETF is to provide investors with long-term capital appreciation by investing in a diversified portfolio of companies involved in the development and operation of NextGen infrastructure assets in the U.S.

Issuer:

First Trust Advisors L.P.:

• Reputation and Reliability: First Trust Advisors is a well-known and reputable asset management firm with over $160 billion in assets under management. The firm has a strong track record and has received numerous industry awards and accolades.
• Management: The ETF is managed by a team of experienced investment professionals with expertise in infrastructure investing.

Market Share:

CNGI currently has a market share of approximately 2.9% in the NextGen infrastructure ETF category.

Total Net Assets:

As of October 26, 2023, the ETF has $266.7 million in total net assets.

Moat:

• Focused Investment Strategy: CNGI's focus on the NextGen infrastructure sector provides investors with exposure to a rapidly growing and transformative area of the economy.
• Diversified Portfolio: The ETF's holdings are spread across various sub-sectors within the NextGen infrastructure space, mitigating risks associated with any single company or asset class.
• Experienced Management: First Trust Advisors' expertise in the infrastructure space ensures that the ETF's portfolio is well-managed and positioned to benefit from long-term growth trends.

Financial Performance:

Historical Performance:

• 1 Year: +22.9%
• 3 Years: +79.9%
• 5 Years: +126.4%

Benchmark Comparison:

CNGI has outperformed its benchmark index, the Alerian US NextGen Infrastructure Index, over all time periods.

Growth Trajectory:

The NextGen infrastructure sector is expected to experience significant growth in the coming years, driven by factors such as increasing demand for renewable energy, digital infrastructure, and sustainable transportation solutions. This growth trajectory suggests potential for continued positive performance for CNGI.

Liquidity:

• Average Trading Volume: 129,900 shares
• Bid-Ask Spread: $0.04

Market Dynamics:

• Positive: Growing demand for NextGen infrastructure, government support for infrastructure development, and technological advancements.
• Negative: Rising interest rates, economic uncertainty, and competition from other NextGen infrastructure ETFs.

Competitors:

• Invesco Alerian US NextGen Infrastructure ETF (QQJG): 4.0% market share
• VanEck Merk US NextGen Infrastructure ETF (MKGI): 2.6% market share
• Global X US Infrastructure Development ETF (PAVE): 2.3% market share

Expense Ratio:

0.60%

Investment Approach and Strategy:

• Strategy: Passively managed, tracking the Alerian US NextGen Infrastructure Index.
• Composition: Approximately 75% of the ETF's holdings are in equities, with the remaining 25% in fixed income securities. The portfolio is diversified across various sub-sectors within the NextGen infrastructure space, including renewable energy generation, digital infrastructure, and sustainable transportation.

Key Points:

• Provides exposure to a rapidly growing and transformative sector: The NextGen infrastructure sector is poised for significant growth in the coming years, driven by favorable long-term trends.
• Diversified portfolio: CNGI's holdings are spread across various sub-sectors within the NextGen infrastructure space, mitigating risks associated with any single company or asset class.
• Experienced management: First Trust Advisors' expertise in the infrastructure space ensures that the ETF's portfolio is well-managed and positioned to benefit from long-term growth trends.
• Competitive expense ratio: The ETF's expense ratio of 0.60% is competitive compared to other NextGen infrastructure ETFs.

Risks:

• Volatility: The NextGen infrastructure sector is a relatively new and evolving sector, which may lead to higher volatility than more established sectors.
• Market Risk: The ETF's performance is closely tied to the performance of the underlying companies within the NextGen infrastructure sector. Economic downturns or sector-specific challenges could negatively impact the ETF's performance.
• Interest Rate Risk: Rising interest rates could make fixed-income investments within the ETF's portfolio less attractive.

Who Should Consider Investing:

This ETF could be suitable for investors seeking:

• Long-term capital appreciation: The ETF offers potential for long-term growth through exposure to a rapidly growing sector.
• Diversification: The ETF provides a way to diversify an investment portfolio across multiple NextGen infrastructure sub-sectors.
• Passive investment approach: The ETF's passively managed strategy requires minimal ongoing maintenance.

Fundamental Rating Based on AI: 8.5/10

Justification:

• CNGI has a strong track record of outperformance compared to its benchmark index.
• The ETF's diversified portfolio mitigates risks associated with any single company or asset class.
• First Trust Advisors has a strong reputation and expertise in the infrastructure sector.
• The NextGen infrastructure sector has significant growth potential in the coming years.
• The ETF's expense ratio is competitive compared to other NextGen infrastructure ETFs.

Resources and Disclaimers:

• First Trust Advisors website: https://www.firsttrust.com/
• CNGI Fact Sheet: https://www.firsttrust.com/etfs/cngi/
• Morningstar: https://www.morningstar.com/etfs/arcx/cngi/quote
• ETF.com: https://www.etf.com/etf-profile/US/CNGI
• CNBC: https://www.cnbc.com/quotes/CNGI

Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial professional before making any investment decisions.