Oil & Gas

Investing in Local, U.S.-Made Oil & Gas

The iShares U.S. Oil & Gas Exploration & Production (IEO) ETF tracks a market-cap weighted index of companies in the U.S. oil and gas exploration and production space according to the Dow Jones.

IEO is the most representative exchange-traded fund (ETF) in the oil and gas exploration and production segment. Its cap-weighting scheme makes the fund extremely top-heavy, with its top 10 holdings comprising most of its overall portfolio.

It is a highly liquid fund, trading actively with narrow spreads and excellent underlying liquidity. IEO’s relatively steep expense ratio of 0.42% may be a bit daunting, but it is still a well-managed fund. Furthermore, its securities lending program has caused it to recover most of its fee of late.

U.S. News evaluated 25 Equity Energy ETFs and has ranked IEO #3, giving it ratings for Costs: Good; Tracking Error: Excellent; Bid/Ask Ratio: Excellent; and Holdings Diversity: Typical.

The fund’s top five holdings include ConocoPhillips, 15.38%; EOG Resources, Inc., 10.55%; Phillips 66, 10.28%; Valero Energy Corp, 7.13; and Pioneer Natural Resources, 4.68%. IEO is 100% invested in the United States and its two main sectors are Oil & Gas Exploration, 57.73%, and Oil & Gas Refining, 35.7%, with Oil & Gas Transportation, 5.8%, third and less than 1% in Integrated Oil & Gas, Coal and Oil & Drilling.

Chart courtesy of StockCharts.com

The fund was created on May 1, 2006. It has $241 million in assets under management, 57 holdings and an average spread of 0.04%. Over the trailing 12 months, the stock has traded between $46.12 and $63.22. Its current share price is around $55 has left it with a yield of 1.85%.

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To sum up, this iShares equity seeks to track the investment results of the Dow Jones U.S. Select Oil Exploration & Production Index composed of U.S. equities in the oil and gas exploration and production sector. While this fund does present investors with the prime opportunity to gain exposure to this sector, please conduct your own due diligence in deciding whether IEO fits your individual portfolio’s goals.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.