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This will be the first of two articles where I will be looking for ETFs, which have significantly outperformed the market, and have outperformed competing ETFs but still have low assets. To get my list of "unknown ETFs" I used the Fidelity ETF screener to find ETFs that met my goals of outperformance, but also key criteria like bid/ask spread, and how long the ETF has been trading.

Criteria:

Leverage/Inverse: Exclude Leveraged & Inverse

ETF Type: ETF

Asset Class: Equity

Net Assets: < $80 Million

Price Performance YTD: >30% [SPY Performance YTD 21.31%]

Volume 30 Day average: Between 5K and 40K

Average monthly bid/ask spread: <= 0.25%

Inception Date: Before 4/14/2013 [Have at least 6-month history]

Results

Using the criteria above I found 14 ETFs in my final screen, which are shown in the table below. After looking at each ETF in the table and comparing it to competing ETFs I decided for this article I would focus on the PowerShares S&P SmallCap Energy Portfolio ETF (PSCE).

(click to enlarge)

Unknown ETF: PowerShares S&P SmallCap Energy Portfolio ETF

What makes fund Unique?

When looking at PSCE I found that is has highly concentrated holdings, with the top 10 holdings making up 63.61% of the portfolio. I also found that all the underlying companies were from the United States, so they are able to take advantage of the recent boom in energy production. What makes this ETF special is that it includes companies that are behind the scenes in energy production. For example, the ETF includes companies like Bristow Group (BRS), which provides helicopter services to offshore oil & gas rigs, or Geospace Technologies (GEOS), which provides scientific instruments so oil & gas companies can find reserves. The first chart below shows the holdings of the ETF with weight and industry classification for each, with the data coming from the PSCE website, and industry classification came from Finviz.com. The second chart below I created to show the industry allocation broken down into the four main industries that the ETF holds.

Symbol

Company

Weight

Industry

GPOR

Gulfport Energy Corp

16.10%

Independent Oil & Gas

BRS

Bristow Group Inc

8.71%

Air Services, Other

PDCE

PDC Energy Inc

6.95%

Independent Oil & Gas

HOS

Hornbeck Offshore Services Inc

5.67%

Oil & Gas Equipment & Services

CKH

SEACOR Holdings Inc

5.45%

Shipping

CRZO

Carrizo Oil & Gas Inc

4.92%

Independent Oil & Gas

SGY

Stone Energy Corp

4.60%

Independent Oil & Gas

EXH

Exterran Holdings Inc

3.95%

Oil & Gas Equipment & Services

NR

Newpark Resources Inc

3.64%

Oil & Gas Equipment & Services

GEOS

Geospace Technologies Corp

3.62%

Scientific & Technical Instruments

AREX

Approach Resources Inc

3.24%

Oil & Gas Drilling & Exploration

TTI

TETRA Technologies Inc

3.24%

Oil & Gas Equipment & Services

CJES

C&J Energy Services Inc

3.05%

Oil & Gas Equipment & Services

CLD

Cloud Peak Energy Inc

2.92%

Industrial Metals & Minerals

NOG

Northern Oil and Gas Inc

2.88%

Oil & Gas Drilling & Exploration

CRK

Comstock Resources Inc

2.54%

Independent Oil & Gas

FST

Forest Oil Corp

2.07%

Independent Oil & Gas

IO

ION Geophysical Corp

1.93%

Scientific & Technical Instruments

MCF

Contango Oil & Gas Co

1.85%

Independent Oil & Gas

ERA

Era Group Inc

1.75%

Air Services, Other

TESO

Tesco Corp

1.75%

Oil & Gas Equipment & Services

SFY

Swift Energy Co

1.69%

Independent Oil & Gas

MTRX

Matrix Service Co

1.67%

Heavy Construction

PES

Pioneer Energy Services Corp

1.62%

Oil & Gas Drilling & Exploration

PVA

Penn Virginia Corp

1.29%

Independent Oil & Gas

BAS

Basic Energy Services Inc

1.09%

Oil & Gas Equipment & Services

GIFI

Gulf Island Fabrication Inc

0.98%

Metal Fabrication

PQ

PetroQuest Energy Inc

0.83%

Independent Oil & Gas

(click to enlarge)

Competing ETFs

There are two main competitors in the US energy ETF space, which are extremely popular with investors, but have underperformed PSCE since its inception. The two ETFs I will be comparing PSCE to are the Energy Select Sector SPDR ETF (XLE), and JPMorgan Alerian MLP Index ETN (AMJ). The reason I chose to compare PSCE to XLE is that XLE includes all the large-cap big name oil & gas, drillers, explorers, and services companies. The reason I chose to compare PSCE to AMJ was it provides access to Master Limited Partnerships (MLP), which own and operate pipelines and storage facilities, which are transporting and storing the vast amounts of new energy production in the North America. The chart below from Yahoo Finance shows that since its inception PSCE has significantly outperformed the market in general as well as both XLE and AMJ. This outperformance has not been just a small outperformance it has been very large, with PSCE doubling the return of the SPY, XLE, and AMJ since inception.

(click to enlarge)

Closing thoughts

In closing, I believe PSCE is a good option to play the energy production boom in the United States. For investors, it is a matter of preference and risk tolerance as to which route to choose for exposure to US energy production, PSCE with its small-cap high growth focus, XLE with its large-cap focus, or AMJ with its income producing MLPs. For someone who can handle the risk of small-cap stocks, and is bullish on the future of energy production in the United States, I believe PSCE is the perfect candidate.

Disclaimer

Source: An Unknown ETF Investors Should Know About: Part 1