Should You Invest in the iShares U.S. Oil & Gas Exploration & Production ETF (IEO)?

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), a passively managed exchange traded fund launched on 05/01/2006.

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.

Investor-friendly, sector ETFs provide many options 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 16, placing it in bottom 0%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $681.81 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.

Costs

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 0.40%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 2.89%.

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) accounts for about 18.19% of total assets, followed by Eog Resources Inc (EOG) and Phillips (PSX).

The top 10 holdings account for about 70.81% of total assets under management.

Performance and Risk

Year-to-date, the iShares U.S. Oil & Gas Exploration & Production ETF has added about 3.78% so far, and was up about 8.73% over the last 12 months (as of 03/07/2024). IEO has traded between $78.88 and $102.39 in this past 52-week period.

The ETF has a beta of 1.48 and standard deviation of 33.31% for the trailing three-year period, making it a high risk choice in the space. With about 52 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares U.S. Oil & Gas Exploration & Production ETF sports a Zacks ETF Rank of 4 (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 Energy Exploration & Production ETF (PXE) tracks Dynamic Energy Exploration & Production Intellidex Index and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) tracks S&P Oil & Gas Exploration & Production Select Industry Index. Invesco Energy Exploration & Production ETF has $128.83 million in assets, SPDR S&P Oil & Gas Exploration & Production ETF has $3.56 billion. PXE has an expense ratio of 0.60% and XOP charges 0.35%.

Bottom Line

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.

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iShares U.S. Oil & Gas Exploration & Production ETF (IEO): ETF Research Reports

ConocoPhillips (COP) : Free Stock Analysis Report

EOG Resources, Inc. (EOG) : Free Stock Analysis Report

Phillips 66 (PSX) : Free Stock Analysis Report

SPDR S&P Oil & Gas Exploration & Production ETF (XOP): ETF Research Reports

Invesco Energy Exploration & Production ETF (PXE): ETF Research Reports

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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