Sure, the volume is light (not yet a third a of the daily
average), but the iShares Dow Jones U.S. Oil & Gas
Exploration & Production Index Fund (NYSE:
) enjoying a nice end to the week with a Friday gain of nearly
As an energy ETF, IEO is a prime beneficiary of the strong
April jobs report delivered earlier today, but another catalyst
is at work for the $316.2 million fund. IEO's largest holding,
Occidental Petroleum (NYSE:
) announced today that controversial Chairman and former chief
executive officer will step down after shareholders withheld
support for him at the California-based
company's investor meeting
IEO allocates 13.07 percent of its weight to Occidental, the
fourth-largest U.S. oil company, an allocation that is nearly 500
basis points larger than the ETF's second-largest holding,
Anadarko Petroleum (NYSE:
earlier this week
, IEO and some other energy sector
represent prudent avenues for accessing Occidental's
potential-laden story. That story becomes all the more alluring
with Irani gone because some institutional investors believed
Irani was still running the show, blocking current CEO Steve
Chazen from creating shareholder value by possibly spinning off
Occidental's midstream/downstream operations.
Irani had also drawn the ire of shareholders for years due to
compensation levels that were well above the industry standard.
Irani received nearly $46 million last year just to be chairman.
For the five years through April 2010, Irani received a
staggering $782.48 million in compensation,
Bloomberg reported Irani
will get $38 million and annual payments of $2.2
upon departure. A nice payday(s) to essentially do no work for
Occidental, but shareholders can likely stomach those figures
much easier than knowing Irani's five-year compensation through
April 2010 ate up nearly a third of the company's current
As for IEO, the ETF has a P/E ratio of 25.25 and price-to-book
ratio of 2.55,
according to iShares data
. That means IEO is pricier than the Energy Select Sector SPDR
), which has a P/E of 12.53 and
a price-to-book ratio of 1.85
News of Irani's departure could be a sign that IEO is worth
paying up for. Year-to-date, the ETF has outpaced XLE and the
Vanguard Energy ETF (NYSE:
) by an average of 150 basis points.
Additionally, IEO could give investors some exposure to a
potential downstream divestment by Occidental. It is not only
important to note that the ETF is home to an ample amount of
refining stocks, but which stocks call IEO home.
IEO's two largest refiner holdings are Phillips 66 (NYSE:
) and Marathon Petroleum (NYSE:
), two spin-offs of ConocoPhillips (NYSE:
) and Marathon Oil (NYSE:
). Those stocks combine for 12 percent of IEO's weight.
For more on Occidental and ETFs, click
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
Profit with More New & Research
. Gain access to a streaming platform with all the information
you need to invest better today.
Click here to start your 14 Day Trial of Benzinga