There is clearly some sector liquidation occurring lately in Energy related equities via ETFs in the marketplace, as we have seen notable redemption activity in several products in that space.
XOP (SPDR S&P Oil & Gas Exploration & Production, Expense Ratio 0.35%) has seen $>500 million leave the fund in recent days which is substantial given its overall asset base, while related funds XLE (SPDR Energy Select,
Expense Ratio 0.18%) and OIH (Market Vectors Oil Services, Expense Ratio 0.35%) have seen more than $300 million apiece leave the funds lately.
One thing that comes to mind immediately is the upcoming earnings season where members of these underlying indexes are slated to release their quarterly results inside of the next month or two. In XLE for example, which has a clear large cap slant, XOM (16.17%), CVX (12.91%), and SLB (7.28%) all report their quarterly results between 4/17 (SLB) and 5/1-5/2 (XOM, CVX) accordingly.
The specific sub-sector exposure in these three ETFs is a bit different across the board, as XLE contains many Integrated Oil companies, while OIH concentrates on Oil Services names (SLB 20.62%, HAL 11.73%, NOV 8.00%, BHI 6.81%, and CAM 5%).
SLB is clearly an important individual component to watch in the near term as far as its substantial weighting specifically in OIH, and lesser but notable weighting in XLE.
XOP on the other hand has a noticeable mid and small cap slant in terms of its overall portfolio exposure, and the top names are mostly relatively unknown if not little known companies such as GPRE, PVA, FANG, MHR, and MTDR for example.
So, it is fair to say that the selling lately in Energy equities has not been relegated to one particular sub-sector or “cap size” within the greater space, and there has been clear trimming of long positions at least in these select ETFs.
Several Inverse/Bear (some daily leveraged) funds exist in the Energy equity space that may very well see upticks in trading activity in the next month or so given the prevailing sentiment in the sector, and these include ERY (Direxion Daily Energy Bear 3X Shares, Expense Ratio 0.95%), DUG (UltraShort Oil & Gas, Expense Ratio 0.95%), and DDG (ProShares Short Oil & Gas, Expense Ratio 0.95%).
SPDR S&P Oil & Gas Exploration & Production ETF
For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.
Street One Financial is an educational/research firm utilizing the Broker Dealer services of GWM Group Inc (RLCC) a FINRA registered Broker/Dealer. All trades are executed through GWM Group (RLCC) and cleared by Fidelity (NFS)DTC number 0226. Street One Financial LLC makes available products and services offered by GWM Group Inc., a registered broker-dealer and Member Securities Investor Protection Corporation (SIPC), Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.