This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

New ETF Drills Into Fracking Space

NEW YORK ( TheStreet) -- This week Van Eck launched the Market Vectors Unconventional Oil & Gas ETF (FRAK). The ticker symbol gives an indication that fracking (hydraulic fracturing) of shale oil and shale gas is a key theme in the fund. Other so-called unconventional extraction methods targeted by the fund include coal seam gas, coal bed methane and even oilsands.

The fund has 44 constituent holdings but some of the largest names are more like large diversified energy companies with varying levels of involvement in the "unconventional oil and gas" space. Occidental Petroleum (OXY) is the largest holding in the fund at 8.5%, EOG Resources (EOG) 7.4% and Devon Energy (DVN) 6.4% all have wide footprints across the energy industry including unconventional methods like fracking. Canadian Natural Resources is also a large holding at 7.6% and is a mostly in oilsands but still diversified.

When I first heard of the fund I figured it would be a small-cap-oriented product but really it is more mid cap. FRAK has an average weighted market cap of $20 billion compared to $129 billion for Energy Select Sector SPDR (XLE) and just over $1 billion for the PowerShares S&P Small Cap Energy Portfolio (PSCE). The average weighted market for XLE is so large because over 30% of the fund is allocated to Exxon Mobil (XOM) and Chevron (CVX).

Follow TheStreet on Twitter and become a fan on Facebook.

From the top down, smaller cap is usually more volatile than larger cap. This has been the nature of the relationship between PSCE and XLE. On the way up PSCE goes up more that XLE and on the way down PSCE goes down more than XLE. As more of a mid cap product it is likely that the new fracking ETF will trade between the two most of the time, at least until some of the controversy surrounding fracking subsides.

There is currently a debate under way as to what the environmental consequences of fracking are. There is some evidence that it might actually cause earthquakes. Although this issue has not been resolved yet, the bullish case for the new Unconventional Oil & Gas ETF is that energy prices go higher causing more widespread reliance on unconventional methods despite any environmental concerns. The bear case is that energy prices stay where they are or go lower making it more difficult for the industry to overcome the environmental issues.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $128.49 -0.67%
FB $80.90 1.63%
GOOG $573.21 -0.08%
TSLA $202.43 1.40%
YHOO $43.99 3.21%

Markets

DOW 18,096.90 -106.47 -0.58%
S&P 500 2,098.53 -9.25 -0.44%
NASDAQ 4,967.1410 -12.76 -0.26%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs