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Is PowerShares DB Oil Fund (DBO) a Hot ETF Right Now?

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The PowerShares DB Oil Fund (DBO - Free Report) made its debut on 01/05/2007, and is a smart beta exchange traded fund that provides broad exposure to the Energy ETFs category of the U.S. equity market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

Because the fund has amassed over $471.63 M, this makes it one of the largest ETFs in the Energy ETFs. DBO is managed by Invesco Powershares. Before fees and expenses, DBO seeks to match the performance of the DBIQ Optimum Yield Crude Oil Index Excess Return.

The DBIQ Optimum Yield Crude Oil Index Excess Return Index is a rules-based index composed of futures contracts on Light Sweet Crude Oil (WTI) and is intended to reflect the performance of crude oil.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for DBO are 0.75%, which makes it one of the least expensive products in the space.

The fund has a 12-month trailing dividend yield of 0%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

When you look at individual holdings, Nymex Light Sweet Crude Oil Future (CLH9) accounts for about 99.99% of the fund's total assets, followed by United States Treasury Bill and United States Treasury Bill.

Its top 10 holdings account for approximately 200.04% of DBO's total assets under management.

Performance and Risk

The ETF return is roughly 16.75% so far this year and was up about 47.76% in the last one year (as of 06/12/2018). In the past 52-week period, it has traded between $7.44 and $12.64.

The fund has a beta of 0.79 and standard deviation of 30.49% for the trailing three-year period, which makes DBO a high choice in this particular space. With about 10 holdings, it has more concentrated exposure than peers.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


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