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Should You Invest in the SPDR S&P Oil & Gas Exploration & Production ETF (XOP)?

Looking for broad exposure to the Energy - Exploration segment of the equity market? You should consider the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), a passively managed exchange traded fund launched on 06/19/2006.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many 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 1, placing it in top 6%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $4.38 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 U.S. 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

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain 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 1.22%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many 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, Sm Energy Company (SM) accounts for about 3.49% of total assets, followed by Callon Petroleum Company (CPE) and Marathon Oil Corporation (MRO).

The top 10 holdings account for about 25.90% of total assets under management.

Performance and Risk

So far this year, XOP has added about 90.25%, and is up about 138.77% in the last one year (as of 11/10/2021). During this past 52-week period, the fund has traded between $46.34 and $111.47.

The ETF has a beta of 2.33 and standard deviation of 55.19% for the trailing three-year period, making it a high risk choice in the space. With about 57 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 $146.05 million in assets, iShares U.S. Oil & Gas Exploration & Production ETF has $377.91 million. PXE has an expense ratio of 0.63% and IEO charges 0.42%.

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
 
Marathon Oil Corporation (MRO): Free Stock Analysis Report
 
SM Energy Company (SM): Free Stock Analysis Report
 
Callon Petroleum Company (CPE): 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
 
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