Should You Invest in the SPDR S&P Oil & Gas Exploration & Production ETF (XOP)?
If you're interested in broad exposure to the Energy - Exploration segment of the equity market, look no further than the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), a passively managed exchange traded fund launched on 06/19/2006.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also 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 14, placing it in bottom 13%.
Index Details
The fund is sponsored by State Street Global Advisors. It has amassed assets over $3.78 billion, making it one of the largest ETFs attempting to match the performance of the Energy - Exploration segment of the equity market. XOP seeks to match the performance of the S&P Oil & Gas Exploration & Production Select Industry Index before fees and expenses.
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.
Costs
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 2.70%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, 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, Southwestern Energy Co (SWN) accounts for about 2.62% of total assets, followed by Sm Energy Co (SM) and Antero Resources Corp (AR).
The top 10 holdings account for about 24.50% of total assets under management.
Performance and Risk
The ETF return is roughly 7.55% so far this year and it's up approximately 8.48% in the last one year (as of 08/17/2023). In that past 52-week period, it has traded between $114.83 and $160.62.
The ETF has a beta of 1.93 and standard deviation of 42.80% 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 carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, XOP is a sufficient option for those seeking exposure to the Energy ETFs area of the market. Investors might also want to consider some other ETF options in the space.
Invesco Dynamic Energy Exploration & Production ETF (PXE) tracks Dynamic Energy Exploration & Production Intellidex Index and the iShares U.S. Oil & Gas Exploration & Production ETF (IEO) tracks Dow Jones U.S. Select Oil Exploration & Production Index. Invesco Dynamic Energy Exploration & Production ETF has $162.84 million in assets, iShares U.S. Oil & Gas Exploration & Production ETF has $712 million. PXE has an expense ratio of 0.63% and IEO charges 0.39%.
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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SPDR S&P Oil & Gas Exploration & Production ETF (XOP): ETF Research Reports
Southwestern Energy Company (SWN): Free Stock Analysis Report
SM Energy Company (SM): Free Stock Analysis Report
Antero Resources Corporation (AR): Free Stock Analysis Report
iShares U.S. Oil & Gas Exploration & Production ETF (IEO): ETF Research Reports
Invesco Dynamic Energy Exploration & Production ETF (PXE): ETF Research Reports