Should You Invest in the iShares U.S. Oil & Gas Exploration & Production ETF (IEO)?
Designed to provide broad exposure to the Energy - Exploration segment of the equity market, the iShares U.S. Oil & Gas Exploration & Production ETF (IEO) is a passively managed exchange traded fund launched on 05/01/2006.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also 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 13, placing it in bottom 19%.
The fund is sponsored by Blackrock. It has amassed assets over $214.06 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.
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
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 2.03%.
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) accounts for about 14.33% of total assets, followed by Phillips (PSX) and Marathon Petroleum Corp (MPC).
The top 10 holdings account for about 69.87% of total assets under management.
Performance and Risk
Year-to-date, the iShares U.S. Oil & Gas Exploration & Production ETF has added roughly 2.52% so far, and is down about -12.44% over the last 12 months (as of 11/15/2019). IEO has traded between $46.40 and $62.69 in this past 52-week period.
The ETF has a beta of 1.40 and standard deviation of 25.27% for the trailing three-year period, making it a high risk choice in the space. With about 61 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 a suitable 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) 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 Dynamic Energy Exploration & Production ETF has $27.79 M in assets, SPDR S&P Oil & Gas Exploration & Production ETF has $1.88 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.
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iShares U.S. Oil & Gas Exploration & Production ETF (IEO): ETF Research Reports
SPDR S&P Oil & Gas Exploration & Production ETF (XOP): ETF Research Reports
Invesco Dynamic Energy Exploration & Production ETF (PXE): ETF Research Reports
Marathon Petroleum Corporation (MPC): Free Stock Analysis Report
Phillips 66 (PSX): Free Stock Analysis Report
ConocoPhillips (COP): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.