Designed to provide broad exposure to the Energy - Exploration segment of the equity market, the iShares U.S. Oil & Gas Exploration & Production ETF (IEO - Free Report) is 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.
Sector ETFs are also funds of convenience, offering many 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 9, placing it in bottom 44%.
The fund is sponsored by Blackrock. It has amassed assets over $217 M, 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.
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
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 1.96%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. 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 - Free Report) accounts for about 15.38% of total assets, followed by Eog Resources Inc (EOG - Free Report) and Phillips (PSX - Free Report) .
The top 10 holdings account for about 68.35% of total assets under management.
Performance and Risk
The ETF has lost about -5.83% and is down about -6.03% so far this year and in the past one year (as of 01/24/2020), respectively. IEO has traded between $46.40 and $62.69 during this last 52-week period.
The ETF has a beta of 1.45 and standard deviation of 24.84% for the trailing three-year period, making it a high risk choice in the space. With about 59 holdings, it effectively diversifies company-specific risk.
IShares U.S. Oil & Gas Exploration & Production ETF sports a Zacks ETF Rank of 5 (Strong Sell), which is based on expected asset class return, expense ratio, and momentum, among other factors. IEO, then, is not the best option for investors seeking exposure to the Energy ETFs segment of the market. Instead, there are better ETFs in the space to consider.
Invesco Dynamic Energy Exploration & Production ETF (PXE - Free Report) tracks Dynamic Energy Exploration & Production Intellidex Index and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) tracks S&P Oil & Gas Exploration & Production Select Industry Index. Invesco Dynamic Energy Exploration & Production ETF has $22.44 M in assets, SPDR S&P Oil & Gas Exploration & Production ETF has $2.40 B. PXE has an expense ratio of 0.63% and XOP charges 0.35%.
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.