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

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Looking for broad exposure to the Energy - Exploration segment of the equity market? You should consider the iShares U.S. Oil & Gas Exploration & Production ETF (IEO - Free Report) , a passively managed exchange traded fund launched on 05/01/2006.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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 16, placing it in bottom 0%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $592.85 million, making it one of the larger ETFs attempting to match the performance of the Energy - Exploration segment of the 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 0.40%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 2.88%.

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.

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

Looking at individual holdings, Conocophillips (COP - Free Report) accounts for about 18.78% of total assets, followed by Eog Resources Inc (EOG - Free Report) and Marathon Petroleum Corp (MPC - Free Report) .

The top 10 holdings account for about 70.61% of total assets under management.

Performance and Risk

The ETF has lost about -3.12% so far this year and is down about -9.04% in the last one year (as of 09/11/2024). In that past 52-week period, it has traded between $87.76 and $111.94.

The ETF has a beta of 1.42 and standard deviation of 31.09% for the trailing three-year period, making it a high risk choice in the space. With about 50 holdings, it has more concentrated exposure than peers.

Alternatives

IShares U.S. Oil & Gas Exploration & Production ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, IEO is a great option for investors seeking exposure to the Energy ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Invesco Energy Exploration & Production ETF (PXE - Free Report) tracks Dynamic Energy Exploration & Production Intellidex Index and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) tracks S&P Oil & Gas Exploration & Production Select Industry Index. Invesco Energy Exploration & Production ETF has $111.67 million in assets, SPDR S&P Oil & Gas Exploration & Production ETF has $2.56 billion. PXE has an expense ratio of 0.60% 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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