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Is SPDR S&P Oil & Gas Exploration & Production ETF (XOP) a Strong ETF Right Now?
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Designed to provide broad exposure to the Energy ETFs category of the market, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) is a smart beta exchange traded fund launched on 06/19/2006.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Managed by State Street Global Advisors, XOP has amassed assets over $5.36 billion, making it one of the largest ETFs in the Energy ETFs. This particular fund, before fees and expenses, seeks to match the performance of the S&P Oil & Gas Exploration & Production Select Industry Index.
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.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for XOP are 0.35%, which makes it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 1.27%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
XOP's heaviest allocation is in the Energy sector, which is about 100% of the portfolio.
When you look at individual holdings, Occidental Petroleum Corporation (OXY - Free Report) accounts for about 2.98% of the fund's total assets, followed by Apa Corp. (APA - Free Report) and Marathon Oil Corporation (MRO - Free Report) .
Its top 10 holdings account for approximately 23.92% of XOP's total assets under management.
Performance and Risk
So far this year, XOP has added roughly 31.06%, and was up about 67.54% in the last one year (as of 04/28/2022). During this past 52-week period, the fund has traded between $72.88 and $145.64.
The ETF has a beta of 2.13 and standard deviation of 55.37% 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 is a reasonable option for investors seeking to outperform the Energy ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Invesco Dynamic Energy Exploration & Production ETF (PXE - Free Report) tracks Dynamic Energy Exploration & Production Intellidex Index and the iShares U.S. Oil & Gas Exploration & Production ETF (IEO - Free Report) tracks Dow Jones U.S. Select Oil Exploration & Production Index. Invesco Dynamic Energy Exploration & Production ETF has $264.13 million in assets, iShares U.S. Oil & Gas Exploration & Production ETF has $810.91 million. PXE has an expense ratio of 0.63% and IEO charges 0.42%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Energy ETFs.
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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Is SPDR S&P Oil & Gas Exploration & Production ETF (XOP) a Strong ETF Right Now?
Designed to provide broad exposure to the Energy ETFs category of the market, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) is a smart beta exchange traded fund launched on 06/19/2006.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Managed by State Street Global Advisors, XOP has amassed assets over $5.36 billion, making it one of the largest ETFs in the Energy ETFs. This particular fund, before fees and expenses, seeks to match the performance of the S&P Oil & Gas Exploration & Production Select Industry Index.
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.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for XOP are 0.35%, which makes it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 1.27%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
XOP's heaviest allocation is in the Energy sector, which is about 100% of the portfolio.
When you look at individual holdings, Occidental Petroleum Corporation (OXY - Free Report) accounts for about 2.98% of the fund's total assets, followed by Apa Corp. (APA - Free Report) and Marathon Oil Corporation (MRO - Free Report) .
Its top 10 holdings account for approximately 23.92% of XOP's total assets under management.
Performance and Risk
So far this year, XOP has added roughly 31.06%, and was up about 67.54% in the last one year (as of 04/28/2022). During this past 52-week period, the fund has traded between $72.88 and $145.64.
The ETF has a beta of 2.13 and standard deviation of 55.37% 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 is a reasonable option for investors seeking to outperform the Energy ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Invesco Dynamic Energy Exploration & Production ETF (PXE - Free Report) tracks Dynamic Energy Exploration & Production Intellidex Index and the iShares U.S. Oil & Gas Exploration & Production ETF (IEO - Free Report) tracks Dow Jones U.S. Select Oil Exploration & Production Index. Invesco Dynamic Energy Exploration & Production ETF has $264.13 million in assets, iShares U.S. Oil & Gas Exploration & Production ETF has $810.91 million. PXE has an expense ratio of 0.63% and IEO charges 0.42%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Energy ETFs.
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.