Should You Invest in the SPDR S&P Oil & Gas Exploration & Production ETF (XOP)?
Launched on 06/19/2006, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) is a passively managed exchange traded fund designed to provide a broad exposure to the Energy - Exploration segment of the equity market.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.
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 15, placing it in bottom 6%.
Index Details
The fund is sponsored by State Street Global Advisors. It has amassed assets over $3.60 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 2.30%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. 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, Valero Energy Corp (VLO) accounts for about 2.70% of total assets, followed by Pbf Energy Inc Class A (PBF) and Apa Corp (APA).
The top 10 holdings account for about 26.52% of total assets under management.
Performance and Risk
The ETF has gained about 7.16% so far this year and it's up approximately 20.21% in the last one year (as of 06/27/2024). In that past 52-week period, it has traded between $125.17 and $160.59.
The ETF has a beta of 1.70 and standard deviation of 35.74% for the trailing three-year period, making it a high risk choice in the space. With about 56 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P 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, XOP is an excellent 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) 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 Energy Exploration & Production ETF has $137.11 million in assets, iShares U.S. Oil & Gas Exploration & Production ETF has $748.28 million. PXE has an expense ratio of 0.60% and IEO charges 0.40%.
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
APA Corporation (APA) : Free Stock Analysis Report
Valero Energy Corporation (VLO) : Free Stock Analysis Report
PBF Energy Inc. (PBF) : Free Stock Analysis Report
iShares U.S. Oil & Gas Exploration & Production ETF (IEO): ETF Research Reports
Invesco Energy Exploration & Production ETF (PXE): ETF Research Reports
