Companies that sell exchange traded funds have been rightly accused of creating some gimmicky funds. State-based ETFs seem to be the latest, now that the

Oklahoma Exchange Traded Fund

(OOK)

is trading.

Upon further review, the Oklahoma fund, sold by OOK Advisors LLC, isn't all that gimmicky. It appears to offer genuine differentiation. Some may criticize the ETF for its extreme weighting in energy -- 72% is invested in high-yielding pipeline owners, drillers and refiners, making it a domestic energy fund. It allocates another 13% toward utilities. But unlike other energy funds, the Oklahoma ETF is big on smaller companies. Its holdings have a median market value of $3.3 billion, compared with $112 billion for the

SPDR Energy Select Sector SPDR

(XLE) - Get Report

, which is dominated by

Exxon Mobil

(XOM) - Get Report

and

Chevron

(CVX) - Get Report

.

The Oklahoma Exchange Traded Fund employs a modified market-cap weighting system so no stock is too influential. That results in several companies of varying size. Large positions include familiar names like

Devon Energy

(DVN) - Get Report

and

Williams Cos.

(WMB) - Get Report

, and some not so familiar, such as

Continental Resources

(CLR) - Get Report

. The non-energy stocks include a couple of financial companies as well as chain restaurant

Sonic Corp.

(SONC)

and

LSB Industries

(LXU) - Get Report

, which makes geothermal heat pumps.

The fund has 29 holdings in all, with pipeline stocks and utilities giving the fund a 2.08% dividend yield. Other energy sub-sectors include 26% in drilling and exploration, 18% in oil and gas refiners and 5% in coal.

As energy prices have rocketed this year, the index underlying the Oklahoma Exchange Traded Fund has risen 37%, double that of the Energy Sector SPDR. If energy prices fall, expect the Oklahoma fund to decline more than the sector SPDR.

Funds may occasionally be marketed with a gimmick but serve a legitimate purpose. For the Oklahoma Exchange Traded Fund, that means unique exposure to the domestic energy sector. Once you get past the marketing angle and look under the hood, the fund could be popular. A soon-to-be-released Texas ETF is heavy in large S&P 500 Index companies with a tilt toward energy and big tech stocks. If that fund gains traction, it might be because it has very little financial exposure, but that remains to be seen.

-- Reported by Roger Nusbaum

.

At the time of publication, Nusbaum had no positions in these securities, although positions may change at any time.

Roger Nusbaum is a portfolio manager with Your Source Financial of Phoenix, and the author of Random Roger's Big Picture Blog. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Nusbaum appreciates your feedback;

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