The iShares U.S. Oil & Gas Exploration & Production ETF (
IEO Quick Quote IEO - Free Report) was launched on 05/01/2006, and is a passively managed exchange traded fund designed to offer broad exposure to the Energy - Exploration segment of the equity market.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
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 7, placing it in top 44%.
The fund is sponsored by Blackrock. It has amassed assets over $309.20 million, making it one of the average sized 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.
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.42%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 2.03%.
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.
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
So far this year, IEO return is roughly 75.09%, and was up about 133.09% in the last one year (as of 10/08/2021). During this past 52-week period, the fund has traded between $24.48 and $61.90.
The ETF has a beta of 2.04 and standard deviation of 47.45% 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 reasonable 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 $106.48 million in assets, SPDR S&P Oil & Gas Exploration & Production ETF has $4.33 billion. PXE has an expense ratio of 0.63% and XOP charges 0.35%. Bottom Line
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