5 ETFs to Invest in Exxon Mobil Corporation (XOM)
Exxon Mobil Corporation (XOM) is, quite possibly, the best pound-for-pound energy stock on the planet. It boasts oil and natural gas operations, and it doesn't just produce -- it refines, too. That gives Exxon the ability to make money amid high oil prices and weather the lulls.
No, you're never going to jump into Exxon and expect a doubler within a year. But buying XOM on dips -- and reaping plentiful capital gains alongside plumped dividends for the trouble -- has been a winning strategy for decades. Heck, just ask someone you know who bought XOM a year ago and currently is up 20 percent and sitting on a 4 percent (and growing) yield!
[See: 6 Reliable Dividend Stocks Paying Out for 100 Years or More.]
That success has propelled Exxon into the ranks of Wall Street's largest stocks, and it's certainly the biggest energy player by market capitalization. Right now, it's worth just more than $350 billion, making it some $150 billion larger than rival Royal Dutch Shell (RDS.A).
And with size comes great responsibility.
Many exchange-traded funds are "market cap-weighted," which means that the fund holds each stock at a percentage that is proportionate to their caps versus the other stocks it holds. More simply put: Bigger stocks make up a bigger percentage of the fund, while smaller stocks are "weighted" less.
That dynamic, more often than not, plays out well for companies that are heavy in Exxon Mobil shares, thanks to the energy giant's resilience and strong dividends. Yes, holding a lot of XOM instead of other stocks can put a cap on growth potential, but it can keep volatility down and sanity aloft.
Here's a look at the five funds that have the most weight dedicated toward Exxon:
iShares MSCI Global Energy Producers ETF (FILL). The FILL ETF is dedicated solely to energy stocks that play some part in the exploration and/or production of one or more energy sources. So you get focused production ("upstream") companies such as Occidental Petroleum Corp. (OXY). You get so-called "integrated" oil and natural gas majors (upstream, midstream and downstream) like Exxon.
You even get coal players like Consol Energy (CNX). FILL even offers some geographic diversity, with only half the fund invested in American energy companies.
Exxon Mobil takes up a huge chunk of that at 17.5 percent of FILL's weight. Expenses are 0.39 percent, or $39 annually for every $10,000 invested.
Vanguard Energy ETF (VDE). While Vanguard's dirt-cheap VDE is a bit smaller at roughly 135 holdings to FILL's 180, it's also a bit wider in scope. You see, FILL's exposure to midstream and downstream operations is limited only to any integrated oil majors that serve in those capacities.
However, VDE actually invests directly in those two streams, even if they have no upstream business. So VDE still invests (heavily) in majors like Exxon and Chevron Corp. ( CVX), but also services companies like Schlumberger ( SLB) and pipeline firms such as Kinder Morgan (KMI).
[See: Oil ETFs: 8 Ways to Invest in Black Gold.]
Exxon makes up more than half of VDE's integrated weight, at 22.3 percent. Expenses are 0.1 percent.
iShares Edge MSCI Multifactor Energy ETF (ERGF). The ERGF is one of iShares' "Edge" funds, which take a flavor, then put it through a wringer consisting of a few quality screens.
Namely, ERGF takes an index of large- and mid-cap energy stocks, then looks for "proven drivers of return: inexpensive stocks, financially healthy firms, trending stocks and relatively smaller companies." The result is a select group of just 22 holdings, such as Concho Resources ( CXO), which is clobbering the market with 40 percent gains this year.
Still, market cap matters, so XOM is weighted at 22.9 percent ... and Chevron is a hefty 18 percent, itself. Expenses are 0.35 percent.
Fidelity MSCI Energy Index (FENY). If you want cheap sector exposure, Fidelity is your firm. While Schwab and Vanguard typically have this fund provider beat for things like large-cap stocks or broad bond exposure, Fidelity is the king of low-cost sector funds.
Such is the case with FENY, which is designed to provide broad American energy exposure for a mere 8 basis points. However, the fund is hardly broad in practice -- Exxon makes up 24 percent of the fund, and when you throw in CVX and SLB, nearly 45 percent of the fund is concentrated in just three holdings. Expenses are 0.08 percent.
iShares U.S. Energy ETF (IYE). If you love Exxon Mobil, but you don't want to hold just one energy stock, the IYE is the fairest compromise you can get.
At various points over the past few years, Exxon has comprised more than a quarter of this ETF's weight, though it currently sits at "just" 24.7 percent.
[Read: Why High-Yield Bonds Belong in Your Portfolio.]
Like FENY, this is a broad U.S. energy fund that ain't quite so broad, with top-three XOM, CVX and SLB coming in around the same 45 percent. Still, you do get access to nearly 80 companies in the oil and gas complex, and that covers all three streams. Expenses are 0.44 percent.
More From US News & World Report
