VanEck Vectors Oil Services ETF (NEW YORK:OIH) is a popular investment vehicle to gain broad exposure to the Energy – Equipment and Services sector of the stock market. This ETF is designed to mirror the performance of US-listed oil the services sector, which primarily serves the upstream oil industry, including segments such as oil equipment, oil services, and oil drilling. I have previously expressed my positive long-term view on the energy sector and think this is a good fund to get access to.
OIH was launched on December 20, 2011. This fund follows a passive management strategy, attempting to mirror the performance of the MVIS US Listed Oil Services 25 Index, before fees and expenses are deducted. The index in question monitors the performance of US companies that provide services to the upstream oil sector. The fund is sponsored by VanEck and has amassed an impressive $2.3 billion assets, making it one of the largest ETFs in this segment.
ETFs offer several advantages to investors, including low costs, transparency, flexibility and tax efficiency. Additionally, it provides a convenient way to gain low-risk, diversified exposure to a broad group of companies in the energy equipment and services sector.
ETF Holdings: Dive into the core of OIH
The ETF consists of 26 stocks. Key properties include:
- Schlumberger NV (SLB): As the ETF’s most significant holding, SLB accounts for approximately 19.56% of the total. It operates as a leading global oilfield services organization, providing technology, project management and information solutions.
- Halliburton Co (HAL): With the second largest position in the ETF, HAL makes up about 11.70% of the fund. It stands as one of the largest global providers of services and products in the energy sector.
- Baker Hughes Co (BKR): Representing approximately 8.96% of the ETF, BKR is an energy technology firm that provides solutions to energy and industrial customers around the globe.
- Tenaris SA (TS): TS is approximately 5.99% in OIH. The company is a prominent provider of pipes and related services to the global energy industry, along with several other industrial applications.
- TechnipFMC plc (FTI): Comprising approximately 5.58% of the ETF, FTI is a well-respected global entity in subsea, onshore/offshore and surface projects within the energy sector.
Peer comparison: How does OIH stack up?
Two other notable ETFs in the Energy – Equipment & Services sector are the iShares US Oil Equipment & Services ETF (IEZ) and ETF SPDR S&P Oil & Gas Equipment & Services (XES). IEZ tracks the Dow Jones US Select Oilfield Equipment and Services Index, managing $349 million in assets and maintaining an expense ratio of 0.40%. On the other hand, XES mirrors the S&P Oil & Gas Equipment & Services Select Industry Index, oversees $410 million in assets and has an expense ratio of 0.35%.
Comparatively, OIH boasts higher assets under management and a similar expense ratio. OIH has outperformed both funds on a relative basis, largely due to its large allocation to SLB, which has grown over 27% in the past three years.
The pros and cons: Weighing the merits of the investment
Investing in the OIH ETF has its advantages and disadvantages. On the positive side, the fund offers broad exposure to the energy equipment and services sector, which is poised to benefit from growing global energy demand. ETF areas are some of the largest and most established companies in the industry, offering the potential for strong returns.
On the downside, the fund’s heavy concentration in the top 5 stocks makes it susceptible to company-specific risks. In addition, the fund’s performance may be affected by geopolitical tensions and global economic conditions affecting the energy market.
Conclusion: Is OIH the right investment for you?
Investing in OIH can bring diversification and growth potential to your portfolio, especially if you’re bullish on the prospects of the energy equipment and services sector. In the short term, the fund’s performance may be affected by oil price volatility and global economic uncertainties. But from a long-term perspective, as global energy demands continue to grow, the companies within this fund’s portfolio could benefit. If you are a patient investor with the ability to understand the dynamics of the energy sector and can handle the potential short-term volatility, the OIH ETF could be a valuable addition to your investment portfolio.
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