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If the IEA Is Right, These ETFs Are Good Long-Term Bets


The International Energy Agency said the US will surpass Saudi Arabia as the world's largest crude producer by 2020.

PowerShares Dynamic Energy Sector Portfolio (NYSEARCA:PXI): The PowerShares Dynamic Energy Sector Portfolio has decent size with over $109 million in AUM, but this is another fund that has a tendency to get lost in the shuffle of oil ETFs. That is a shame because PXI has sharply outperformed larger rivals such as the Energy Select Sector SPDR (NYSEARCA:XLE) this year.

PXI is also an under-appreciated shale play as its 58 constituents include EOG, Hess (NYSE:HES), and some of the major integrated names. What makes PXI most appealing is diversity. The ETF offers exposure to integrated names, independents, refiners, and pipeline firms.

SPDR S&P Oil & Gas Exploration & Production ETF (NYSEARCA:XOP): The SPDR S&P Oil & Gas Exploration & Production ETF, a favorite of short-term traders because of the ETF's volatile nature, has a tendency to make an appearance on shale ETF lists. XOP's presence on this list is validated for several reasons.

First, XOP is heavily tilted to exploration and production firms (74.5% of the fund's weight), meaning the fund's constituency is not highly exposed to refining margins.

Second, XOP is essentially an equal weight product, so even the largest independents such as ConocoPhillips (NYSE:COP) and Anadarko Petroleum (NYSE:APC) do not dominate this fund.

Third, XOP is not excessively weighted to its holdings that have the largest market values. On a related note, XOP is home to plenty of mid-cap names that have been rumored to be takeover targets. With US oil production rising, but output slowing for some of the major integrateds, Exxon in particular, a fresh wave of mergers and acquisitions activity in the oil patch could come to pass. That could be a boon down the road for XOP investors.

Editor's Note: This content was originally published on by The ETF Professor.

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