If you're interested in broad exposure to the Energy - Exploration segment of the equity market, look no further than the iShares U.S. Oil & Gas Exploration & Production ETF (
IEO Quick Quote IEO - Free Report) , a passively managed exchange traded fund launched on 05/01/2006.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy - Exploration is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 3, placing it in top 19%.
The fund is sponsored by Blackrock. It has amassed assets over $342.56 million, making it one of the larger ETFs attempting to match the performance of the Energy - Exploration segment of the equity market. IEO seeks to match the performance of the Dow Jones U.S. Select Oil Exploration & Production Index before fees and expenses.
The Dow Jones U.S. Select Oil Exploration & Production Index is a free-float adjusted market capitalization-weighted index. The Index includes companies that are engaged in the exploration for and extraction, production, refining, and supply of oil and gas products.
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 this ETF are 0.42%, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 2.20%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Energy sector--about 100% of the portfolio.
Looking at individual holdings, Conocophillips (
COP Quick Quote COP - Free Report) accounts for about 16.88% of total assets, followed by Eog Resources Inc ( EOG Quick Quote EOG - Free Report) and Marathon Petroleum Corp ( MPC Quick Quote MPC - Free Report) .
The top 10 holdings account for about 68.01% of total assets under management.
Performance and Risk
The ETF return is roughly 42.64% so far this year and it's up approximately 53.73% in the last one year (as of 07/23/2021). In that past 52-week period, it has traded between $24.48 and $58.84.
The ETF has a beta of 2.17 and standard deviation of 46.79% for the trailing three-year period, making it a high risk choice in the space. With about 51 holdings, it effectively diversifies company-specific risk.
IShares U.S. Oil & Gas Exploration & Production ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, IEO is a sufficient option for those seeking exposure to the Energy ETFs area of the market. Investors might also want to consider some other ETF options in the space.
Invesco Dynamic Energy Exploration & Production ETF (
PXE Quick Quote PXE - Free Report) tracks Dynamic Energy Exploration & Production Intellidex Index and the SPDR S&P Oil & Gas Exploration & Production ETF ( XOP Quick Quote XOP - Free Report) tracks S&P Oil & Gas Exploration & Production Select Industry Index. Invesco Dynamic Energy Exploration & Production ETF has $81.93 million in assets, SPDR S&P Oil & Gas Exploration & Production ETF has $3.45 billion. PXE has an expense ratio of 0.63% and XOP charges 0.35%. Bottom Line
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Zacks ETF Center.