With Trump Taking Office Soon, It’s Time To Consider The Fracking ETF
Benefitting hugely from the rebound in crude oil prices has been FRAK (VanEck Vectors Unconventional Oil & Gas, Expense Ratio 0.54%, $58.6 million in AUM), which is up nearly 15% from its lows.
FRAK debuted back in February of 2012, and will be celebrating its five year anniversary of trading live of course in two months in the new year (the fund currently has a 2-star Morningstar ranking). This ETF is the first and only entry into the “Unconventional Oil & Gas” niche within the greater category of “Energy,” and like its ticker symbol suggests, involves companies that are engaged in Fracking.
According to BBC news, fracking is defined as “the process of drilling down into the earth before a high-pressure water mixture is directed at the rock to release the gas inside.” Furthermore, BBC states, “Water, sand and chemicals are injected into the rock at high pressure which allows the gas to flow out to the head of the well. The process can be carried out vertically of, more commonly, by drilling horizontally to the rock layer and can create new pathways to release gas or can be used to extend existing channels. The term fracking refers to how the rock is fractured apart by the high pressure mixture.”
FRAK has had negligible net inflows year to date, totaling less than $4 million, and averages only about 26,000 shares traded on an average daily basis, so it is likely still not on widespread radars of those portfolio managers whom may be trading other well-known “Oil & Gas” funds such as the $17.8 billion XLE (SPDR Energy Select Sector, Expense Ratio 0.15%) and the $2.4 billion XOP (SPDR S&P Oil & Gas Exploration & Production, Expense Ratio 0.35%), for example.
Which companies are engaged in “Fracking” one might ask? When we look at the underlying portfolio of FRAK we see the following exposures: 1) EOG (8.18%), 2) APC (7.96%), 3) OXY (6.96%), 4) PXD (6.20%), 5) DVN (6.17%), 6) APA (4.75%), 7) CXO (4.13%), 8) CVE (3.67%), 9) HES (3.53%), and 10) MRO (3.33%).
From a country allocation standpoint, 83% of the portfolio is composed of companies domiciled in the U.S. with the remaining 17% being Canadian domiciled equities. The fund is certainly worth watching in the new-year amid a new Presidential administration, since fracking has been the topic of environmental controversy in the past, and Trump appears more friendly to fracking that the previous administration.
FRAK shares fell $0.03 (-0.16%) to $18.65 in Friday morning trading. Year-to-date, FRAK has surged 40.44%.
FRAK currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #23 of 37 ETFs in the Energy Equities ETFs category.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.
Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.
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