Yesterday we spoke about renewed interest in downside puts in the largest Oil and Gas Exploration and Production ETF XOP (SPDR S&P Oil & Gas Exploration & Production, Expense Ratio 0.35%) and this action coincides with extreme weakness lately in Crude Oil futures themselves.
Those futures are down an additional 3% today, in a sign that the oil bear market is far from over.
In fact, XOP is barely above its 52-week low in today’s trading, and other related Oil and Gas Equity funds are also suffering on this move ahead of the first trading day in June tomorrow.
Leveraged inverse funds like DRIP (Direxion Daily S&P Oil & Gas Exploration & Production Bull 3X, Expense Ratio 1.10%, $20 million in AUM) are flying once again today (up over 5%), as is the much smaller two times levered bear product from ProShares, SOP (UltraShort Oil & Gas Exploration & Production 0.95%, less than $1 million in AUM).
While the Explorers and Producers have been hammered in the short term regardless if we look at Small, Mid, or Large cap names in the space, one segment of the Energy Equity space that is now represented in ETF form that has held its ground is that of “Refiners.” Launched less than two years ago in August of 2015, CRAK (VanEck Vectors Oil Refiners, Expense Ratio 0.59%) remains rather small in AUM terms ($4.5 million in AUM,) but has actually shown net positive performance year-to-date in what has shown to be a difficult environment from companies operating in the Oil and Gas space, largely to the continued volatility and pressure in Oil and Gas prices themselves.
According to fund literature, “Not all energy performs the same. Oil refiners are a differentiated segments of the energy sector.” Furthermore, “Potential to benefit from lower oil prices. Crack spread, or the difference between the price of crude oil and its refined products is a common indicator of the potential profitability of the refining industry. Unlike other energy sector segments, oil refiners may benefit from lower oil prices if crack spreads remain attractive.”
The prior line may very well explain CRAK’s resilience presently in an environment of challenging Crude Oil prices for other segments of the Energy Equity market. Finally, VanEck points out that “CRAK is the first and only U.S.-listed ETF to provide pure-play exposure to global oil refiners.”
When we examine portfolio holdings in the underlying basket we see that the largest allocation is the ordinary shares of Reliance Industries Ltd. (8.25%), and top five exposures round out as follows: 2) PSX (7.57%), 3) JKTG Holdings Inc. (ordinary shares, 7.48%), 4) MPC (6.44%), and 5) VLO (6.17%).
About 33% of the portfolio is invested in U.S. domiciled companies while there are lesser weightings to Japan (14%), South Korea (8%), India (8%), and so on.
The VanEck Vectors Oil Refiners ETF (NYSE:CRAK) was trading at $22.36 per share on Wednesday morning, down $0.48 (-2.10%). Year-to-date, CRAK has gained 7.29%, versus a 7.86% rise in the benchmark S&P 500 index during the same period.
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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The article This Oil-Focused ETF Is Actually Up Substantially This Year (CRAK) was originally published at ETFDailynews.com.