Making its debut on 06/19/2006, smart beta exchange traded fund SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) provides investors broad exposure to the Energy ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Because the fund has amassed over $2.96 billion, this makes it one of the largest ETFs in the Energy ETFs. XOP is managed by State Street Global Advisors. XOP, 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.
The fund has a 12-month trailing dividend yield of 2.39%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
XOP's heaviest allocation is in the Energy sector, which is about 100% of the portfolio.
When you look at individual holdings, Antero Resources Corp (AR - Free Report) accounts for about 3.32% of the fund's total assets, followed by Cnx Resources Corp (CNX - Free Report) and Marathon Oil Corp (MRO - Free Report) .
Its top 10 holdings account for approximately 28.65% of XOP's total assets under management.
Performance and Risk
The ETF has gained about 3.30% so far this year and is down about -1.22% in the last one year (as of 08/16/2024). In the past 52-week period, it has traded between $128.16 and $160.59.
The fund has a beta of 1.70 and standard deviation of 34.93% for the trailing three-year period, which makes XOP a high risk choice in this particular space. With about 54 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Oil & Gas Exploration & Production ETF is an excellent option for investors seeking to outperform the Energy ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Invesco Energy Exploration & Production ETF (PXE - Free Report) tracks Dynamic Energy Exploration & Production Intellidex Index and the iShares U.S. Oil & Gas Exploration & Production ETF (IEO - Free Report) tracks Dow Jones U.S. Select Oil Exploration & Production Index. Invesco Energy Exploration & Production ETF has $134.69 million in assets, iShares U.S. Oil & Gas Exploration & Production ETF has $671.03 million. PXE has an expense ratio of 0.60% 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.
Making its debut on 06/19/2006, smart beta exchange traded fund SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) provides investors broad exposure to the Energy ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Because the fund has amassed over $2.96 billion, this makes it one of the largest ETFs in the Energy ETFs. XOP is managed by State Street Global Advisors. XOP, 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.
The fund has a 12-month trailing dividend yield of 2.39%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
XOP's heaviest allocation is in the Energy sector, which is about 100% of the portfolio.
When you look at individual holdings, Antero Resources Corp (AR - Free Report) accounts for about 3.32% of the fund's total assets, followed by Cnx Resources Corp (CNX - Free Report) and Marathon Oil Corp (MRO - Free Report) .
Its top 10 holdings account for approximately 28.65% of XOP's total assets under management.
Performance and Risk
The ETF has gained about 3.30% so far this year and is down about -1.22% in the last one year (as of 08/16/2024). In the past 52-week period, it has traded between $128.16 and $160.59.
The fund has a beta of 1.70 and standard deviation of 34.93% for the trailing three-year period, which makes XOP a high risk choice in this particular space. With about 54 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Oil & Gas Exploration & Production ETF is an excellent option for investors seeking to outperform the Energy ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Invesco Energy Exploration & Production ETF (PXE - Free Report) tracks Dynamic Energy Exploration & Production Intellidex Index and the iShares U.S. Oil & Gas Exploration & Production ETF (IEO - Free Report) tracks Dow Jones U.S. Select Oil Exploration & Production Index. Invesco Energy Exploration & Production ETF has $134.69 million in assets, iShares U.S. Oil & Gas Exploration & Production ETF has $671.03 million. PXE has an expense ratio of 0.60% 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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