For investors seeking momentum, iShares U.S. Oil & Gas Exploration & Production ETF (IEO - Free Report) is probably on radar now. The fund just hit a 52-week high and is up nearly 36% from its 52-week low price of $50.49/share.
But are more gains in store for this ETF? Let’s take a quick look at the fund and the near-term outlook on it to get a better idea on where it might be headed:
IEO in Focus
This ETF offers exposure to U.S. companies that are engaged in the exploration, production, and distribution of oil and gas. It is home to 63 securities with a double-digit allocation to the top two firms, while others hold less than 7% share. It charges 44 basis points in annual fees (see: all the Energy ETFs here).
Why the Move?
The energy segment of the broad market has been an area to watch lately given the soaring oil prices. Brent jumped to $70 per barrel for the first time since December 2014 while WTI crude broke above $64 per barrel. This is primarily thanks to return of geopolitical uncertainty in Iran — one of the major oil producers — OPEC-led output cuts, and soaring demand. Further, the state of backwardation (where later-dated contracts are cheaper than near-term contracts) in the oil market after three long years is acting as the biggest catalyst. All these fundamentals have set the stage for a strong rally in the energy stocks and ETFs for the near term.
More Gains Ahead?
Currently, IEO has a Zacks ETF Rank #3 (Hold) with a Low risk outlook. Therefore, it is hard to get a handle on its future returns one way or the other. However, many of the segments that make up this ETF have a strong Zacks Industry Rank. So, there is definitely some promise for those who want to ride this surging ETF a little further.
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