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iShares U.S. Energy ETF: Concentrated Exposure To Domestic U.S. Oil And Gas Stocks

Mar. 08, 2021 6:13 PM ETiShares U.S. Energy ETF (IYE) ETF


  • The iShares U.S. Energy ETF seeks to track the performance of the Dow Jones U.S. Oil & Gas Index (“Underlying Index”).
  • Offers investors exposure to the domestic U.S. energy market.
  • Comparisons with other ETFs.
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NYSEARCA:IYE offers investors exposure to the U.S. energy market, including many of the big oil companies responsible for a large portion of the global energy supply chain. This fund is ideal for investors looking to implement a sector rotation strategy or even for those looking to be overweight in the U.S. energy sector.

Like most domestic energy ETFs, IYE has significant exposure to a few select names in the sector, making up most of its entire portfolio.

2020 was a turbulent year for energy commodities, especially for oil. We saw crude prices fall more than 65% from their 2020 starting levels. 2019 did not paint a pretty picture either for the commodity as prices remained low despite decreased production levels by the Organization of the Petroleum Exporting Countries (“OPEC”) and reduced capacity given the geopolitical tensions in the Middle East.

To add to its woes, oil demand remained weak amid lower global growth expectations arising from the trade dispute between the U.S. and China, the world’s largest oil consumers.

The start of 2020 saw the energy markets witness a double whammy as prices dropped to $12/barrel in March, the lowest in over two decades. On the supply side, a disagreement between Saudi Arabia and Russia, the world’s second and third-largest oil producers, respectively, increased expectations for increased oil production. On the demand side, the global pandemic led to an economic slowdown globally, which saw businesses close and travel restricted, reducing the crude demand by airlines and industries.

The significant drop in demand for fuel by various sectors meant that production exceeded storage capacity, which even led to some WTI Crude Futures contracts trading under zero briefly in April 2020.

Oil and gas companies, which are usually heavily leveraged, found it challenging to carry out operations as credit downgrades soared and defaults become

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This article was written by

Michael A. Gayed, CFA profile picture
Michael A. Gayed is portfolio manager, and author of five award-winning research papers on market anomalies and investing. He has a BS with a double major in Finance & Management from NYU Stern School of Business, and is a CFA Charterholder. Michael runs the investing group The Lead-Lag Report, focused on helping investors outperform in all market conditions. It offers a tactical, data-driven approach to investing, to achieve long-term success even in the face of uncertainty. With increasing market volatility, it's essential to understand risk-on/risk-off signals, seize high-yield opportunities, and leverage award-winning research to maximize returns. Learn More.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This writing is for informational purposes only and Lead-Lag Publishing, LLC undertakes no obligation to update this article even if the opinions expressed change. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. It also does not offer to provide advisory or other services in any jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Lead-Lag Publishing, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

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