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Should You Invest in the SPDR S&P Oil & Gas Exploration & Production ETF (XOP)?

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Looking for broad exposure to the Energy - Exploration segment of the equity market? You should consider the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), a passively managed exchange traded fund launched on 06/19/2006.

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.

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 1, placing it in top 6%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $5.06 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.

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 0.35%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.18%.

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, Occidental Petroleum Corporation (OXY) accounts for about 2.98% of total assets, followed by Apa Corp. (APA) and Marathon Oil Corporation (MRO).

The top 10 holdings account for about 23.92% of total assets under management.

Performance and Risk

The ETF has gained about 40.55% and was up about 58.66% so far this year and in the past one year (as of 05/18/2022), respectively. XOP has traded between $72.88 and $145.64 during this last 52-week period.

The ETF has a beta of 1.99 and standard deviation of 55.83% for the trailing three-year period, making it a high risk choice in the space. With about 62 holdings, it effectively diversifies company-specific risk.

Alternatives

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) tracks Dynamic Energy Exploration & Production Intellidex Index and the iShares U.S. Oil & Gas Exploration & Production ETF (IEO) tracks Dow Jones U.S. Select Oil Exploration & Production Index. Invesco Dynamic Energy Exploration & Production ETF has $289.58 million in assets, iShares U.S. Oil & Gas Exploration & Production ETF has $917.57 million. PXE has an expense ratio of 0.63% and IEO charges 0.42%.

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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SPDR S&P Oil & Gas Exploration & Production ETF (XOP): ETF Research Reports
 
Marathon Oil Corporation (MRO) : Free Stock Analysis Report
 
APA Corporation (APA) : Free Stock Analysis Report
 
Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report
 
iShares U.S. Oil & Gas Exploration & Production ETF (IEO): ETF Research Reports
 
Invesco Dynamic Energy Exploration & Production ETF (PXE): ETF Research Reports
 
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