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

Zacks Equity Research
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The iShares U.S. Oil & Gas Exploration & Production ETF (IEO) was launched on 05/01/2006, and is a passively managed exchange traded fund designed to offer broad exposure to the Energy - Exploration segment of the U.S. equity market.

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.

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 8, placing it in top 50%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $410.85 M, making it one of the larger ETFs attempting to match the performance of the Energy - Exploration segment of the U.S. 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

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 0.44%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 0.94%.

Sector Exposure and Top Holdings

ETFs offer a 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.

This ETF has heaviest allocation in the Energy sector--about 100% of the portfolio.

Looking at individual holdings, Conocophillips (COP) accounts for about 11.46% of total assets, followed by Eog Resources Inc (EOG) and Valero Energy Corp (VLO).

The top 10 holdings account for about 59.37% of total assets under management.

Performance and Risk

The ETF has added about 8.39% so far this year and is up roughly 18.51% in the last one year (as of 04/26/2018). In that past 52-week period, it has traded between $50.70 and $70.53.

The ETF has a beta of 1.20 and standard deviation of 28.31% for the trailing three-year period, making it a high risk choice in the space. With about 65 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares U.S. 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, IEO 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.

VanEck Vectors Unconventional Oil & Gas ETF (FRAK) tracks MVIS Global Unconventional Oil & Gas Index and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) tracks S&P Oil & Gas Exploration & Production Select Industry Index. VanEck Vectors Unconventional Oil & Gas ETF has $80.88 M in assets, SPDR S&P Oil & Gas Exploration & Production ETF has $2.54 B. FRAK has an expense ratio of 0.54% 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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ISHARS-US O&G (IEO): ETF Research Reports
 
SPDR-SP O&G EXP (XOP): ETF Research Reports
 
VANECK-UNC O&G (FRAK): ETF Research Reports
 
Valero Energy Corporation (VLO) : Free Stock Analysis Report
 
EOG Resources, Inc. (EOG) : Free Stock Analysis Report
 
ConocoPhillips (COP) : Free Stock Analysis Report
 
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