The SPDR S&P Oil & Gas Exploration & Production ETF (XOP – Free Report) was launched on 06/19/2006, and is a passively managed exchange traded fund designed to offer broad exposure to the Energy – Exploration segment of the equity market.
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.
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 11, placing it in bottom 31%.
The fund is sponsored by State Street Global Advisors. It has amassed assets over $4.15 billion, making it one of the largest ETFs attempting to match the performance of the Energy – Exploration segment of the equity market. XOP seeks to match the performance of the S&P Oil & Gas Exploration & Production Select Industry Index before fees and expenses.
The S&P Oil & Gas Exploration & Production Select Industry Index represents the oil and gas exploration and production sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the US common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Oil & Gas Exploration Index is a modified equal weight index.
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF’s expense ratio.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.48%.
Sector Exposure and Top Holdings
It is important to delve into an ETF’s holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. 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, Sm Energy Company (SM – Free Report) accounts for about 3.49% of total assets, followed by Callon Petroleum Company (CPE – Free Report) and Marathon Oil Corporation (MRO – Free Report) .
The top 10 holdings account for about 25.90% of total assets under management.
Performance and Risk
The ETF has added roughly 3.61% so far this year and it’s up approximately 61.21% in the last one year (as of 01/11/2022). In that past 52-week period, it has traded between $64.32 and $111.47.
The ETF has a beta of 2.29 and standard deviation of 55% for the trailing three-year period, making it a high risk choice in the space. With about 57 holdings, it effectively diversifies company-specific risk.
SPDR S&P Oil & Gas Exploration & Production ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, XOP is a sufficient option for those seeking exposure to the Energy ETFs area of the market. Investors might also want to consider some other ETF options in the space.
Invesco Dynamic Energy Exploration & Production ETF (PXE – Free Report) tracks Dynamic Energy Exploration & Production Intellidex Index and the iShares U.S. Oil & Gas Exploration & Production ETF (IEO – Free Report) tracks Dow Jones U.S. Select Oil Exploration & Production Index. Invesco Dynamic Energy Exploration & Production ETF has $149.74 million in assets, iShares U.S. Oil & Gas Exploration & Production ETF has $360.11 million. PXE has an expense ratio of 0.63% and IEO charges 0.42%.
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.