Credit: Shutterstock photoThe SPDR S&P Oil & Gas Equipment & Services ETF (XES) made its debut on 06/19/2006, and is a smart beta exchange traded fund that provides broad exposure to the Energy ETFs category of the U.S. equity market.
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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
XES is managed by State Street Global Advisors, and this fund has amassed over $381.04 M, which makes it one of the average sized ETFs in the Energy ETFs. Before fees and expenses, XES seeks to match the performance of the S&P Oil & Gas Equipment & Services Select Industry Index.
The S&P Oil & Gas Equipment & Services Select Industry Index represents the oil and gas equipment and services 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 Equipment Index is a modified equal weight index.
Cost & Other Expenses
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.
Operating expenses on an annual basis are 0.35% for this ETF, which makes it the least expensive product in the space.
XES's 12-month trailing dividend yield is 1.72%.
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.
Representing 100% of the portfolio, the fund has heaviest allocation to the Energy sector.
Looking at individual holdings, Transocean Ltd. (RIG) accounts for about 3.38% of total assets, followed by Rowan Cos. Plc Class A (RDC) and Baker Hughes A Ge Company Class A (BHGE).
Its top 10 holdings account for approximately 33.22% of XES's total assets under management.
Performance and Risk
So far this year, the ETF has lost about -1.43%, and is down about -7.00% in the last one year (as of 04/20/2018). XES has traded between $12.96 and $19.19 in the past 52-week period.
The ETF has a beta of 1.54 and standard deviation of 39.21% for the trailing three-year period, making it a high choice in the space. With about 41 holdings, it has more concentrated exposure than peers.
Alternatives
SPDR S&P Oil & Gas Equipment & Services ETF is not a suitable option for investors seeking to outperform the Energy ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
IShares U.S. Oil Equipment & Services ETF (IEZ) tracks Dow Jones U.S. Select Oil Equipment & Services Index and the VanEck Vectors Oil Services ETF (OIH) tracks MVIS U.S. Listed Oil Services 25 Index. IShares U.S. Oil Equipment & Services ETF has $235.58 M in assets, VanEck Vectors Oil Services ETF has $1.67 B. IEZ has an expense ratio of 0.44% and OIH charges 0.35%.
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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ISHARS-US OIL E (IEZ): ETF Research Reports
VANECK-OIL SVC (OIH): ETF Research Reports
SPDR-SP O&G EQP (XES): ETF Research Reports
Rowan Companies PLC (RDC): Free Stock Analysis Report
Transocean Ltd. (RIG): Free Stock Analysis Report
Baker Hughes Incorporated (BHGE): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
