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Is Invesco DB Energy Fund (DBE) a Hot ETF Right Now?

Zacks Equity Research
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Launched on 01/05/2007, the Invesco DB Energy Fund (DBE) is a smart beta exchange traded fund offering broad exposure to the Energy ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

The fund is managed by Invesco. DBE has been able to amass assets over $218.42 M, making it one of the average sized ETFs in the Energy ETFs. Before fees and expenses, this particular fund seeks to match the performance of the DBIQ Optimum Yield Energy Index Excess Return.

The DBIQ Optimum Yield Energy Index Excess Return Index is a rules-based index composed of futures contracts on some of the most heavily traded energy commodities in the world: Light Sweet Crude Oil (WTI); Heating Oil; Brent Crude Oil; RBOB Gasoline; & Natural Gas. It is intended to reflect the performance of the energy sector.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Operating expenses on an annual basis are 0.78% for DBE, making it one of the more expensive products in the space.

It has a 12-month trailing dividend yield of 0%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

When you look at individual holdings, Nymex Light Sweet Crude Oil Future (CLH9) accounts for about 24.55% of the fund's total assets, followed by Ice Brent Crude Oil Future (COF9) and Nymex Ny Harbor Ulsd Futures (HOM9).

Its top 10 holdings account for approximately 99.98% of DBE's total assets under management.

Performance and Risk

The ETF has gained about 12.18% so far this year and is up roughly 37.67% in the last one year (as of 08/22/2018). In the past 52-week period, it has traded between $11.84 and $17.29.

The fund has a beta of 0.63 and standard deviation of 25.68% for the trailing three-year period, which makes DBE a high choice in this particular space. With about 5 holdings, it has more concentrated exposure than peers.

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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PWRSH-DB EGY FD (DBE): ETF Research Reports
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