It is not the largest exchange traded fund tracking the energy sector. In fact, it is one of the smallest, but the iShares MSCI Emerging Markets Energy Capped ETF (EMEY) has recently been a solid performer thanks to the resurgence of state-controlled energy giants throughout the developing world.
EMEY, which tracks the MSCI EM Energy 25-50 Index, will not impress on size alone. The fund has just $1.88 million in assets under management, but it jumped 5.2% Wednesday, bringing its three-month gain to 10.4%. That compares favorably with some of the more popular ETFs offering energy sector exposure. [Stick With Energy ETFs]
EMEY has been bolstered by the very state-run energy companies that have previously been a drag on emerging markets ETFs ranging from diversified funds to single-country offerings such as the Global X FTSE Colombia 20 ETF (GXG) and the iShares MSCI Brazil Capped ETF (EWZ) .
Speaking of Brazil and Colombia, EMEY’s exposure to Petrobras (PBR) and Ecopetrol (EC) has proven beneficial. Shares of Petrobras have surged 35% in the past 90 days while Colombia’s Ecopetrol has seen its American depositary receipts jump gain 2% over the same time. The two stocks combine for 13.6% of EMEY’s weight.
EMEY has also remained sturdy despite a 26.5% weight to Russia, making it the ETF’s largest country weight. Gazprom is by far EMEY’s largest holding with a weight of 10.3% and Lukoil checks in at the fifth spot with an allocation of 6%.
The advantage there is the rock-bottom valuations found on Russian stocks, including energy names. Last month, one fund manager told Barron’s Gazprom shares could triple in three years and that the stock’s dividend yield could range from 4.5% to 6% this year. [Is Russia Cheap Enough?]
Gazprom trades 2.5 times earnings, or 59% discount to its 10-year average while Lukoil trades at four times, a 38% discount to its 10-year average, according to Bloomberg. [Russia ETFs Have Plenty of Cheap Stocks]
Overall, EMEY reflects the discounts available with emerging markets energy names. The ETF has a price-to-book ratio under 1.3 compared to 2.74 for the iShares U.S. Energy ETF (IYE), according to iShares data.
iShares MSCI Emerging Markets Energy Capped ETF