Is SPDR S&P Oil & Gas Exploration & Production ETF (XOP) a Strong ETF Right Now?

The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) 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 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.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

Managed by State Street Global Advisors, XOP has amassed assets over $1.72 billion, making it one of the largest ETFs in the Energy ETFs. Before fees and expenses, this particular fund 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.

Annual operating expenses for XOP are 0.35%, which makes it one of the least expensive products in the space.

It's 12-month trailing dividend yield comes in at 2.99%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

XOP's heaviest allocation is in the Energy sector, which is about 98.60% of the portfolio.

Taking into account individual holdings, Antero Resources Corp (AR) accounts for about 2.95% of the fund's total assets, followed by Expand Energy Corp (EXE) and Hess Corp (HES).

XOP's top 10 holdings account for about 29.1% of its total assets under management.

Performance and Risk

The ETF has lost about -17.42% so far this year and is down about -27.04% in the last one year (as of 04/22/2025). In the past 52-week period, it has traded between $101.91 and $158.01.

The ETF has a beta of 1.32 and standard deviation of 33.82% for the trailing three-year period, making it a high risk choice in the space. With about 56 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) 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 Energy Exploration & Production ETF has $70.22 million in assets, iShares U.S. Oil & Gas Exploration & Production ETF has $453.10 million. PXE has an expense ratio of 0.63% 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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This article originally published on Zacks Investment Research (zacks.com).

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