Is Invesco S&P 500 Equal Weight Energy ETF (RYE) a Strong ETF Right Now?

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Designed to provide broad exposure to the Energy ETFs category of the market, the Invesco S&P 500 Equal Weight Energy ETF (RYE) is a smart beta exchange traded fund launched on 11/01/2006.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

There are some investors, though, who think it’s possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

Because the fund has amassed over $447.85 million, this makes it one of the average sized ETFs in the Energy ETFs. RYE is managed by Invesco. This particular fund seeks to match the performance of the S&P 500 Equal Weight Energy Index before fees and expenses.

The S&P 500 Equal Weight Energy Plus Index equally weights stocks in the energy sector of the S&P 500 Index.

Cost & Other Expenses

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

Operating expenses on an annual basis are 0.40% for this ETF, which makes it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 2.78%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it’s still important for investors to research a fund’s holdings.

This ETF has heaviest allocation in the Energy sector – about 100% of the portfolio.

Looking at individual holdings, Occidental Petroleum Corp (OXY) accounts for about 6.41% of total assets, followed by Apa Corp (APA) and Marathon Oil Corp (MRO).

The top 10 holdings account for about 49.72% of total assets under management.

Performance and Risk

The ETF has added roughly 20.98% and is up about 46.22% so far this year and in the past one year (as of 07/18/2022), respectively. RYE has traded between $37.22 and $81.27 during this last 52-week period.

The ETF has a beta of 1.71 and standard deviation of 48.30% for the trailing three-year period, making it a high risk choice in the space. With about 24 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco S&P 500 Equal Weight Energy ETF is an excellent option for investors seeking to outperform the Energy ETFs segment of the market. There are other ETFs in the space which investors could consider as well.

Vanguard Energy ETF (VDE) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR ETF (XLE) tracks Energy Select Sector Index. Vanguard Energy ETF has $7.04 billion in assets, Energy Select Sector SPDR ETF has $31.94 billion. VDE has an expense ratio of 0.10% and XLE charges 0.10%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Energy ETFs.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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Invesco S&P 500 Equal Weight Energy ETF (RYE): ETF Research Reports
 
Marathon Oil Corporation (MRO) : Free Stock Analysis Report
 
APA Corporation (APA) : Free Stock Analysis Report
 
Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report
 
Energy Select Sector SPDR ETF (XLE): ETF Research Reports
 
Vanguard Energy ETF (VDE): ETF Research Reports
 
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