The expression “strike while the iron’s hot” is not a new idiom. It dates back to the 15th century, where it originated from blacksmiths who could only work with their iron while it was, well, hot. And much like a good chunk of iron, the market is burning hot enough for us to strike — strike at oil, that is. I like the iShares US Oil & Gas Exploration & Production ETF (IEO), counsels Jim Woods, editor of Successful Investing.
Oil has been seeing a resurgence in the market as of late. As the conflicts in the Middle East heat up due to Iran’s recent attack on Israel, some analysts are predicting that oil could rise to as high as $100 per barrel. That, combined with commodity Exchange Traded Funds having a potential resurgence due to inflation, creates the perfect opportunity to strike at one of the best oil ETFs on the market, IEO.
Opened in 2006 by BlackRock, IEO tracks a market-cap weighted index of US companies in the oil and gas industry. The underlying index includes US companies of various market caps that are involved in either the exploration of oil and gas, or the drilling, production, refining, and supply of such products.
IEO’s top holdings consist of ConocoPhillips (COP), EOG Resources, Inc. (EOG), Phillips 66 (PSX), Marathon Petroleum Corp. (MPC), Valero Energy Corp. (VLO), and others. The fund’s cap-weighting structure makes it top-heavy, and its top 10 holdings comprise the majority of its overall portfolio. However, IEO is a well-managed fund, and has excellent underlying liquidity.
Currently, the fund has an expense ratio of 0.40% and $901 million in assets under management. Over 97% of the fund’s holdings are in Energy Minerals, making this an almost entirely energy-dominated fund.
As of April 15, the oil ETF was up 6.1% in the past month, 18.9% in the last three months, and 16.8% year to date. This strong performance, coupled with the current market demand, makes IEO a strong choice for those looking to add an energy investment to their portfolio.
Recommended Action: Buy IEO.
