These Energy ETFs Are Creeping Higher
Fortunately for investors, the roster of energy ETFs that have been quietly creeping higher in recent weeks does not begin and end with the Energy Select Sector SPDR.
The iShares Dow Jones US Oil & Gas Exploration & Production Index Fund is a valid play for those looking to avoid excessive exposure to integrated oil names. Occidental Petroleum (NYSE:OXY) is the ETF's largest holding with an allocation of almost 14.5%, but IEO's 60 other holdings are tilted heavily toward independent exploration and production firms and refiners.
One thing to note about this ETF: Its top-five holdings – Occidental, Anadarko Petroleum (NYSE:APC), EOG Resources (NYSE:EOG), Phillips 66 (NYSE:PSX), and Apache (NYSE:APA) – combine for 47% of the fund's weight. In other words, five stocks are the real drivers of IEO's performance.
That has not been a problem over the past month as IEO has gained about 3.2%, but IEO is not for the faint of heart. The ETF carries a beta of 1.71 against the S&P 500, according to iShares data.
EGShares Energy GEMS ETF (NYSEARCA:OGEM)
By far the smallest and least traded ETF on this list, OGEM merits consideration for the investor that is not shy about embracing state-controlled energy firms, of which there are plenty in the developing world. Many of those companies are found in Russia and China. To that end, it is not surprising that Russia and China combine for 52% of OGEM's country weight.
Regarding OGEM's Russia exposure, it may not be as concerning as some might think. The ETF's index already features a dividend yield of 3.3%. However, Russia is forcing its highly profitable, cash-rich state-controlled companies to devote larger percentages of their profits to dividends.
Of course, that move is self-serving in favor of the government, but it benefits other shareholders as well. Additionally, emerging markets energy names are inexpensive relative to their developed market counterparts. IEO carries a P/E ratio of just over 22. OGEM's is just half that. The ETF is up 3.33% in the past month.
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