NEW YORK (TheStreet) -- Last week I covered the domestically listed futures ETFs, United States Natural Gas (UNG) - Get Report and iPath Natural Gas (GAZ) - Get Report. This week I'll take a look at the stock funds.

There's a mutual fund and an ETF for natural gas:

Fidelity Select Natural Gas

(FSNGX) - Get Report

and

First Trust ISE-Revere Natural Gas

(FCG) - Get Report

. FSNGX invests at least 80% of assets in companies involved in production, transmission, distribution and exploration of natural gas, along with companies that provide equipment and services to the aforementioned. FCG invests in companies engaged in the exploration and production of natural gas.

Aside from those mandates, the funds offer a difference in passive vs. active management. FCG ranks companies based on four measures: price/earnings; price/book; return on equity; and the correlation to gas futures prices. It takes into consideration market capitalization and liquidity, ranks the funds, and puts the top 30 into the index. It rebalances quarterly.

FSNGX changes its strategy with the times. Right now, manager James McElligott "has been concentrating on firms with improving cost structures that are focused on growth," according to Morningstar analyst Jonathan Rahbar, who cites the large holding in

Chesapeake Energy

(CHK) - Get Report

as part of this strategy. As of July 31, FSNGX held 8.8% of assets in CHK, along with 2.8% in Chesapeake convertibles. (See

Cramer's take

.)

With fewer restrictions, FSNGX can overweight portfolio positions and move outside of its mandate with a portion of assets. While its No. 1 holding CHK is 8.8% of assets, the top holding in FCG is

Stone Energy

(SGY)

, at 5.5% of assets on Sept. 14. A single stock could grow to dominate FCG, but only for three months at most, due to rebalancing.

FCG's mandate is more restrictive and all of the 30 companies in the fund are involved in exploration and production. FSNGX holds many service and equipment stocks such as

Nabors Industries

(NBR) - Get Report

,

Helmerich & Payne

(HP) - Get Report

and

BJ Services

( BJS).

It also holds refiners

Valero Energy

(VLO) - Get Report

and

Tesoro

(TSO)

, coal producers including, but not limited to,

Arch Coal

(ACI) - Get Report

and

China Shenhua

(1088.HK)

, as well as solar stocks such as

SunPower

(SPWR) - Get Report

and

First Solar

(FSLR) - Get Report

.

In the short time that FCG has traded, it has outperformed FSNGX. In 2008, FCG lost 46.5% compared to a 56.7% drop in FSNGX. Year to date, through Aug. 31, FCG gained 38.4% vs. 38.7% for FSNGX.

In terms of fees, FCG charges 0.60% compared to 0.85% for FSNGX. Additionally, FSNGX charges a 0.75% fee for shares held less than 30 days.

In general, if you're looking for exposure to natural gas producers, FCG is your best bet, especially because it factors in how well the stocks track natural gas futures. FCG's "dilution" away from natural gas exposure comes via a few large-cap energy firms that have oil interests, but they do not dominate the portfolio. The flip side is that in times when these stocks underperform, there is little protection because the fund will not diversify out of this narrow mandate.

FSNGX hands over the decision of where to invest. Sometimes, FSNGX may resemble

iShares Dow Jones U.S. Oil & Gas Exploration

(IEO) - Get Report

or

iShares Dow Jones U.S. Oil Equipment

(IEZ) - Get Report

more than it resembles FCG. In the past two years, the strategy hasn't worked, as FCG bested FSNGX, but that isn't to say it never will.

FSNGX makes sense for investors who do not already own oil services, natural gas and similar funds, and do not want to do the homework of picking between sectors.

Finally, investors do have one other choice in this space. There is a master limited partnership ETN,

JP Morgan Alerian MLP Index

(AMJ) - Get Report

.

AMJ holds companies mainly involved in the transportation and storage of natural resources (it is not limited to natural gas), though there is also production, exploration, mining, etc. It pays a dividend of more than 7% and offers investors a conservative approach to the sector.

In periods when energy prices are falling, AMJ will be more stable and deliver a solid income stream. When markets turn bullish, however, AMJ will lag FCG and FSNGX by a wide margin.

AMJ has a fee of 0.85%, and because it is an ETN, carries with it the credit risk of the issuer, JP Morgan.

-- Written by Don Dion in Williamstown, Mass.

At the time of publication, Dion had no positions in funds mentioned.

Don Dion is president and founder of

Dion Money Management

, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.