Yahoo Finance 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) 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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
XOP is managed by State Street Global Advisors, and this fund has amassed over $3.91 billion, which makes 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
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 cousins, 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's 12-month trailing dividend yield comes in at 3.11%.
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.
For XOP, it has heaviest allocation in the Energy sector --about 100% of the portfolio.
When you look at individual holdings, Sm Energy Co (SM) accounts for about 2.84% of the fund's total assets, followed by Texas Pacific Land Corp (TPL) and Apa Corp (APA).
Its top 10 holdings account for approximately 26.44% of XOP's total assets under management.
Performance and Risk
So far this year, XOP has gained about 12.41%, and is up about 12.84% in the last one year (as of 09/19/2023). During this past 52-week period, the fund has traded between $114.83 and $160.62.
The fund has a beta of 1.92 and standard deviation of 42.35% for the trailing three-year period, which makes XOP a high risk choice in this particular space. With about 61 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 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 $173.61 million in assets, iShares U.S. Oil & Gas Exploration & Production ETF has $832.91 million. PXE has an expense ratio of 0.63% and IEO charges 0.40%.
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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SPDR S&P Oil & Gas Exploration & Production ETF (XOP): ETF Research Reports
APA Corporation (APA) : Free Stock Analysis Report
SM Energy Company (SM) : 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
Texas Pacific Land Corporation (TPL) : Free Stock Analysis Report
