In the flurry of new subsector ETFs , several energy-related products have hit the market. The old standby ETF for energy exposure not heavily weighted to Exxon Mobil ( XOM) has been the Oil Services HOLDR ( OIH).
Buying OIH, however, can prove problematic for some investors. As with all HOLDRs, its shares can only be bought in round lots of 100, and those shares trade around $150. Those two factors could make investing in OIH too inflexible for some. Consider that energy makes up roughly 10% of the S&P 500, while oil services makes up only a quarter of the sector, as measured by the Energy Sector SPDR ( XLE). As a result, 100 shares of OIH may be too large of a bet for many investors, as the size of the investment could dominate a portfolio. State Street Global Advisors and iShares have both recently rolled out funds that allow investors to more flexibly capture the exploration and production (E&P) and services portions of the energy sector. State Street now offers:
iShares Dow Jones U.S. Oil Equipment & Services (IEZ)
iShares Dow Jones U.S. Oil and Gas Exploration & Production (IEO)
Both the State Street and iShares products are so new that there is very little history to examine in this alphabet soup of ETFs, so let's take a broad look. There is a lot of overlap in the funds. The two E&P vehicles share seven of their respective top-10 stock holdings. The State Street E&P fund does have small weightings in Exxon Mobil and Chevron Texaco ( CVX), while the iShares E&P fund avoids those mega-cap names. If you have energy exposure that includes those two companies, you may want to favor the iShares fund, IEO, to avoid duplication.