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

Designed to provide broad exposure to the Energy – Exploration segment of the equity market, the iShares U.S. Oil & Gas Exploration & Production ETF (IEO) is a passively managed exchange traded fund launched on 05/01/2006.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Additionally, sector ETFs offer convenient ways 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 2, placing it in top 13%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $888.37 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

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 this ETF are 0.42%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 2.63%.

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) accounts for about 17.32% of total assets, followed by Eog Resources Inc (EOG) and Pioneer Natural Resource (PXD).

The top 10 holdings account for about 66.96% of total assets under management.

Performance and Risk

The ETF has gained about 39.21% so far this year and is up about 75.54% in the last one year (as of 08/16/2022). In that past 52-week period, it has traded between $46.60 and $105.40.

The ETF has a beta of 1.71 and standard deviation of 49.18% for the trailing three-year period, making it a high risk choice in the space. With about 55 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares U.S. Oil & Gas Exploration & Production ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, IEO is an outstanding 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 Dynamic Energy Exploration & Production ETF (PXE) tracks Dynamic Energy Exploration & Production Intellidex Index and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) tracks S&P Oil & Gas Exploration & Production Select Industry Index. Invesco Dynamic Energy Exploration & Production ETF has $273.39 million in assets, SPDR S&P Oil & Gas Exploration & Production ETF has $4.58 billion. PXE has an expense ratio of 0.63% 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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iShares U.S. Oil & Gas Exploration & Production ETF (IEO): ETF Research Reports
 
ConocoPhillips (COP) : Free Stock Analysis Report
 
Pioneer Natural Resources Company (PXD) : Free Stock Analysis Report
 
EOG Resources, Inc. (EOG) : Free Stock Analysis Report
 
SPDR S&P Oil & Gas Exploration & Production ETF (XOP): ETF Research Reports
 
Invesco Dynamic Energy Exploration & Production ETF (PXE): ETF Research Reports
 
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