{"id":2731,"date":"2021-06-28T16:28:04","date_gmt":"2021-06-28T16:28:04","guid":{"rendered":"http:\/\/blog.valuengine.com\/?p=2731"},"modified":"2021-06-28T17:10:00","modified_gmt":"2021-06-28T17:10:00","slug":"drill-baby-drill-oil-etfs","status":"publish","type":"post","link":"http:\/\/blog.valuengine.com\/index.php\/drill-baby-drill-oil-etfs\/","title":{"rendered":"Drill, Baby, Drill? Oil ETFs"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">For each blog article, I scan through relevant groups of ETFs that relate to possible investment strategies.\u00a0 Three ETFs from iShares by BlackRock stood out to me this week: <strong>IEO, IEZ, IYE<\/strong>.\u00a0 All have ValuEngine\u2019s strongest rating of 5 checks and all have fared very well in price performance during the past 6 months since the market\u2019s rotation away from growth and toward value, a theme we have discussed in several blog posts over the past couple of months.\u00a0 I was aware of the rotation but unaware that these oil-industry stocks were carried so far by it so quickly.\u00a0<\/span><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\"><strong>IEO<\/strong> is the iShares US Oil &amp; Gas Exploration &amp; Production ETF.\u00a0 Top five holdings include: Conoco Phillips; EOG; Phillips 66; Marathon Petroleum; Hess Corp.<\/span><\/li>\n<li><span style=\"font-weight: 400;\"><strong>IEZ<\/strong> is the iShares US Oil Equipment &amp; Services ETF; Top five holdings include: Schlumberger; Halliburton; ChampionX; Baker Hughes; Helmerich &amp; Payne<\/span><\/li>\n<li><span style=\"font-weight: 400;\"><strong>IYE<\/strong> is the iShares US Energy ETF; Top five holdings include: Exxon Mobil; Chevron; Conoco Phillips; EOG; Schlumberger\u00a0<\/span><\/li>\n<\/ul>\n<h5 style=\"text-align: center;\"><strong>All of the approximately 5,000 stocks, 16 sector groups, 140 industries, and 500 ETFs have been updated on\u00a0<a href=\"http:\/\/www.valuengine.com\/\" target=\"_blank\" rel=\"noreferrer noopener\">www.ValuEngine.com<\/a><\/strong><\/h5>\n<h5 style=\"text-align: center;\"><strong>Free Two Week Trial to all 5,000 plus equities and ETFs covered by ValuEngine\u00a0<a href=\"http:\/\/www.valuengine.com\/pub\/VeSubscribeInfo?pid=1\" target=\"_blank\" rel=\"noreferrer noopener\">HERE<\/a><\/strong><\/h5>\n<p><span style=\"font-weight: 400;\">As a longtime ESG ratings and quantitative analyst in addition to being a vocal proponent of sustainable and ethical investing, these ETFs stood out to me because of the national and global focus on net-zero carbon initiatives.\u00a0 The hyperbolic increase in assets allocated to ESG-aware and sustainable portfolios since 2016 also would augur against the robust price gains experienced by these ETFs and the stocks they hold.\u00a0 Indeed, on a 5-year annualized basis, these ETFs have been among the worst-performing ETFs covered by ValuEngine, all in negative territory while the market was earning double-digit returns. It is fascinating to me that the preponderance of the comeback made by these stocks happened immediately after Biden took office and made the non-zero by 2030 pledge a key goal of his Administration.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Let\u2019s take a closer look at the data behind the numbers.\u00a0 The YTD and 10-Year numbers are as of May 31, 2021.\u00a0 The other data are as of June 20, 2021. Since the three ETFs we chose are iShares, IVV (the iShares S&amp;P 500 ETF) is included for comparative and benchmarking purposes.\u00a0<\/span><\/p>\n<table>\n<tbody>\n<tr>\n<td><\/td>\n<td><b>IEO<\/b><\/td>\n<td><b>IEZ<\/b><\/td>\n<td><b>IYE<\/b><\/td>\n<td><b>IVV<\/b><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">ValuEngine Rating<\/span><\/td>\n<td><b>5<\/b><\/td>\n<td><b>5<\/b><\/td>\n<td><b>5<\/b><\/td>\n<td><span style=\"font-weight: 400;\">3<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">YTD Price Retun<\/span><\/td>\n<td><b>50.88%<\/b><\/td>\n<td><span style=\"font-weight: 400;\">33.18%<\/span><\/td>\n<td><span style=\"font-weight: 400;\">38.71%<\/span><\/td>\n<td><span style=\"font-weight: 400;\">12.70%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">1-Yr. Price Return\u00a0<\/span><\/td>\n<td><span style=\"font-weight: 400;\">64.93%<\/span><\/td>\n<td><b>75.82%<\/b><\/td>\n<td><span style=\"font-weight: 400;\">42.97%<\/span><\/td>\n<td><span style=\"font-weight: 400;\">40.44%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">5-Yr Ann. Price Return<\/span><\/td>\n<td><b>-1.08%<\/b><\/td>\n<td><span style=\"font-weight: 400;\">-18.45%<\/span><\/td>\n<td><span style=\"font-weight: 400;\">-5.86%<\/span><\/td>\n<td><span style=\"font-weight: 400;\">13.85%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">10-Yr Ann. Price Return<\/span><\/td>\n<td><b>-1.35%<\/b><\/td>\n<td><span style=\"font-weight: 400;\">-12.09%<\/span><\/td>\n<td><span style=\"font-weight: 400;\">-1.60%<\/span><\/td>\n<td><span style=\"font-weight: 400;\">14.33%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Volatility<\/span><\/td>\n<td><span style=\"font-weight: 400;\">52.2%<\/span><\/td>\n<td><span style=\"font-weight: 400;\">59.7%<\/span><\/td>\n<td><b>41.2%<\/b><\/td>\n<td><span style=\"font-weight: 400;\">18.5%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Sharpe Ratio (3-Year)<\/span><\/td>\n<td><span style=\"font-weight: 400;\">-0.17<\/span><\/td>\n<td><span style=\"font-weight: 400;\">-0.33<\/span><\/td>\n<td><b>-0.02<\/b><\/td>\n<td><span style=\"font-weight: 400;\">0.90<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Beta<\/span><\/td>\n<td><b>1.86<\/b><\/td>\n<td><span style=\"font-weight: 400;\">2.91<\/span><\/td>\n<td><span style=\"font-weight: 400;\">2.27<\/span><\/td>\n<td><span style=\"font-weight: 400;\">1.00<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Alpha<\/span><\/td>\n<td><b>-0.27<\/b><\/td>\n<td><span style=\"font-weight: 400;\">-0.40<\/span><\/td>\n<td><span style=\"font-weight: 400;\">-0.29<\/span><\/td>\n<td><span style=\"font-weight: 400;\">0.00<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\"># of Stocks<\/span><\/td>\n<td><b>45<\/b><\/td>\n<td><span style=\"font-weight: 400;\">28<\/span><\/td>\n<td><span style=\"font-weight: 400;\">34<\/span><\/td>\n<td><span style=\"font-weight: 400;\">500<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Undervalued by VE %*<\/b><\/td>\n<td><span style=\"font-weight: 400;\">68%<\/span><\/td>\n<td><span style=\"font-weight: 400;\">65%<\/span><\/td>\n<td><b>82%<\/b><\/td>\n<td><span style=\"font-weight: 400;\">37%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">VE Forecast 1-yr. Return<\/span><\/td>\n<td><span style=\"font-weight: 400;\">-1.8%<\/span><\/td>\n<td><span style=\"font-weight: 400;\">-2.0%<\/span><\/td>\n<td><b>-0.7%<\/b><\/td>\n<td><span style=\"font-weight: 400;\">-5.2%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">P\/B Ratio<\/span><\/td>\n<td><span style=\"font-weight: 400;\">2.0x<\/span><\/td>\n<td><span style=\"font-weight: 400;\">3.2x<\/span><\/td>\n<td><b>1.9x<\/b><\/td>\n<td><span style=\"font-weight: 400;\">4.5x<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">P\/S Ratio<\/span><\/td>\n<td><b>1.9x<\/b><\/td>\n<td><span style=\"font-weight: 400;\">3.2x<\/span><\/td>\n<td><span style=\"font-weight: 400;\">2.0x<\/span><\/td>\n<td><span style=\"font-weight: 400;\">13.8x<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Div. Yield<\/span><\/td>\n<td><span style=\"font-weight: 400;\">2.1%<\/span><\/td>\n<td><span style=\"font-weight: 400;\">1.3%<\/span><\/td>\n<td><b>2.8%<\/b><\/td>\n<td><span style=\"font-weight: 400;\">1.4%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Expense Ratio<\/span><\/td>\n<td><span style=\"font-weight: 400;\">0.42%<\/span><\/td>\n<td><span style=\"font-weight: 400;\">0.42%<\/span><\/td>\n<td><span style=\"font-weight: 400;\">0.42%<\/span><\/td>\n<td><span style=\"font-weight: 400;\">0.03%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Index Provider<\/span><\/td>\n<td><span style=\"font-weight: 400;\">S&amp;P Dow Jones<\/span><\/td>\n<td><span style=\"font-weight: 400;\">S&amp;P Dow Jones<\/span><\/td>\n<td><span style=\"font-weight: 400;\">S&amp;P Dow Jones<\/span><\/td>\n<td><span style=\"font-weight: 400;\">S&amp;P Dow Jones<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Index<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Scheme<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Mkt. Cap Weighting\u00a0<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Mkt. Cap Weighting<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Mkt. Cap Weighting<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Mkt. Cap Weighting<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">ETF Sponsor<\/span><\/td>\n<td><span style=\"font-weight: 400;\">iShares by Blackrock<\/span><\/td>\n<td><span style=\"font-weight: 400;\">iShares by Blackrock<\/span><\/td>\n<td><span style=\"font-weight: 400;\">iShares by Blackrock<\/span><\/td>\n<td><span style=\"font-weight: 400;\">iShares by Blackrock<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p style=\"text-align: center;\"><strong>All ValuEngine ETF reports updated and available:\u00a0<a href=\"http:\/\/www.valuengine.com\/rep\/mresearch_report\" target=\"_blank\" rel=\"noopener\">Click HERE<\/a><\/strong><\/p>\n<p><span style=\"font-weight: 400;\">There are few data points in terms of historical stability to recommend these highly volatile ETFs with high Betas, low Alphas and low Sharpe Ratios.\u00a0 So, what do value investors and our models like?\u00a0 Strong indicators populate the next six rows.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The majority of their constituents are considered undervalued by ValuEngine, including a whopping 82% of those in IYE.\u00a0 In comparison, 63% of the stocks in the S&amp;P 500 are considered overvalued.\u00a0 Traditional valuation measures such as Price\/Book also Price\/Sales reflect that these ETFs are significantly undervalued with respect to the market.\u00a0 The dividend yields of IYE and IEO are also higher despite the fact that Oil Exploration is traditionally an industry characterized by low yields. Only IEZ, the Oil Equipment and Services has a yield slightly lower than IVV.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The final data row in this grouping is even more intriguing.\u00a0 The forecast 1-year returns for each of the three oil-centric ETFs are negative but less negative than the -5.2% projected for the market.\u00a0 Perhaps that is the most interesting number on the chart for many of our subscribers.\u00a0 ValuEngine\u2019s forecast model projects a 12-month negative-return market for the S&amp;P 500.\u00a0 <\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">A surprising number to me on this chart is the fact that IYE holds just 34 stocks while IEO holds 45 and IEZ holds 28.\u00a0 I find it surprising because IEO and IEZ both represent sub-sectors, along with natural gas exploration companies, of the Energy sector represented by IYE.\u00a0 This is the result of differing index methodologies for the sector ETFs and the select industry ETFs by S&amp;P Dow Jones Indexes.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Interpreting the data above, I conclude that the ValuEngine models indicate that the relative resurgence of these three ETFs has longer to run. Therefore, short-term tactical traders might still be buying here.\u00a0 However, in no way do I see these ETFs playing a strategic role in most investors\u2019 portfolios.\u00a0 The stocks of the vast majority of companies in ETFs have very dim prospects as long-term holdings.\u00a0\u00a0<\/span><\/p>\n<h5 style=\"text-align: center;\"><strong>Financial Advisory Services based on ValuEngine research available:<\/strong><\/h5>\n<h5 style=\"text-align: center;\"><strong><a href=\"http:\/\/www.valuenginecapital.com\/\" target=\"_blank\" rel=\"noreferrer noopener\">www.ValuEngineCapital.com<\/a><\/strong><\/h5>\n<p><span style=\"font-weight: 400;\">This is especially true of IEO and IEZ. With the global evolution away from fossil fuels apparently well on the way, existing reserves are being discounted by analysts as future \u201cstranded assets\u201d with no purpose.\u00a0 In fact, ExxonMobil recently acceded to shareholder resolutions, largely championed by hedge fund Engine No. 1, to change its business model away from accumulating new petroleum reserves and toward developing alternative sources of energy that could have more of a future.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To the extent that even the major integrated providers agree that oil reserves will become stranded assets, what future could there be for companies that explore to find new sources of oil and those that manufacture and service the equipment they use?\u00a0 Beyond that, IEZ is very non-diversified with two companies, Schlumberger and Halliburton with bad histories in governance and human rights, comprising 45% of its weight.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Finally, all three iShares carry an expense ratio of 0.42%.\u00a0 That seems ludicrously high for industry indexed ETFs with plain vanilla methodologies holding liquid US stocks.\u00a0 Again, this is something of little consequence to traders, but these high fees are anathema for investors.\u00a0 In fact, given the stratospheric volatility of these ETFs, only skilled and nimble traders who thrive on volatility should consider short-term deployment within their strategies.\u00a0<\/span><\/p>\n<p>By Herb Blank<\/p>\n<p>ValuEngine, Inc<\/p>\n<div class=\"entry-content\">\n<p>_______________________________________________________________________________<\/p>\n<h5>All of the approximately 5,000 stocks, 16 sector groups, and 140 industries have been updated on\u00a0<a href=\"http:\/\/www.valuengine.com\/\" target=\"_blank\" rel=\"noreferrer noopener\">www.ValuEngine.com<\/a><\/h5>\n<h5>New: Over 500 ETF reports updated weekly.<\/h5>\n<h5>Financial Advisory Services based on ValuEngine research available through\u00a0<a href=\"http:\/\/www.valuenginecapital.com\/\" target=\"_blank\" rel=\"noreferrer noopener\">ValuEngine Capital Management, LLC<\/a><\/h5>\n<h5>Free Two Week Trial to all 5,000 plus equities covered by ValuEngine\u00a0<a href=\"http:\/\/www.valuengine.com\/pub\/VeSubscribeInfo?pid=1\" target=\"_blank\" rel=\"noreferrer noopener\">HERE<\/a><\/h5>\n<h5>Subscribers log in\u00a0<a href=\"http:\/\/www.valuengine.com\/ve\/mainve?pid=1\" target=\"_blank\" rel=\"noreferrer noopener\">HERE<\/a><\/h5>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>For each blog article, I scan through relevant groups of ETFs that relate to possible investment strategies.\u00a0 Three ETFs from iShares by BlackRock stood out to me this week: IEO, IEZ, IYE.\u00a0 All have ValuEngine\u2019s strongest rating of 5 checks and all have fared very well in price performance during the past 6 months since &#8230; <a title=\"Drill, Baby, Drill? Oil ETFs\" class=\"read-more\" href=\"http:\/\/blog.valuengine.com\/index.php\/drill-baby-drill-oil-etfs\/\" aria-label=\"More on Drill, Baby, Drill? Oil ETFs\">Read more<\/a><\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[130,1,39],"tags":[1469,1829,1704,1733,1824,1825,1830,1832,1831,1770,1826,1468,1510,1827,93,1828,28,1656,1659,63],"_links":{"self":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts\/2731"}],"collection":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/comments?post=2731"}],"version-history":[{"count":1,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts\/2731\/revisions"}],"predecessor-version":[{"id":2732,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts\/2731\/revisions\/2732"}],"wp:attachment":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/media?parent=2731"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/categories?post=2731"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/tags?post=2731"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}