VPU Vanguard Utilities ETF

Lowest temperatures in more than two decades have left most parts of America shivering. In particular, the Midwest and Northeast, experienced arctic-like conditions after the polar vortex. Southern U.S. is also seeing freezing temperatures.
 
This is restricting the movement of people and goods by road, air or ship and hurting some food companies. However, some sectors are likely to reap benefits from this severe weather condition.
 
Investors might like to cash in on this opportunity in the form of ETFs that carry lower risk compared to individual stock holdings. For those investors, we have highlighted some ETFs that could be in focus and move higher on rising demand in the coming days:
 
Energy ETFs
 
Oil and gas price has risen this week in anticipation of rising demand and falling supply. Harsh weather is curtailing production and disrupting some refinery operations while boosting demand for heating fuel. This combination of rising demand and falling supply will push up oil and gas prices further (read: Will the Clean Energy ETF Surge Continue in 2014?). 
 
In order to play this surge, investors could either deal directly in the futures market or concentrate on oil and gas producers. The two lucrative choices in this space could be SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and First Trust ISE-Revere Natural Gas Index Fund (FCG). While XOP provides equal weight exposure to the basket of securities in oil and gas, FCG provides the same to the natural gas space.
 
XOP has $717.6 million in AUM invested across 81 securities and FCG holds 30 stocks in its basket having $453.6 million in its asset base. In terms of annual fees, XOP is cheaper than FCG by 25 bps. However, FCG is expected to outperform XOP as it has a Zacks ETF Rank of 2 or ‘Buy’ rating while XOP has Zacks ETF Rank of 3 or ‘Hold’ rating.
 
For the futures market, investors have United States Oil Fund (USO) for direct exposure to the spot price of WTI and United States Natural Gas Fund (UNG) for natural gas spot price (read: Will Natural Gas ETFs Extend Their Winning Streak?).
 
Utility ETFs
 
Utility companies are poised to benefit from severe cold as more Americans use electricity for heating, leading to higher bills. Though there are several ETFs in this space, the two ultra-popular Utilities Select Sector SPDR (XLU) and Vanguard Utilities ETF (VPU) might be good options (see: all the Utilities ETFs here).
 
With AUM of $4.5 billion, XLU provides exposure to a small basket of 31 securities with nearly 57.4% concentration on the top 10 firms. Electric utilities take the top spot in terms of sector at 54.33%, closely followed by multi utilities (37.84%). The ETF charges 0.18% in expense ratio. Though the fund could get a boost in the near term from a freezing U.S., investors should note that the long-term outlook on the fund remains bleak with a Zacks ETF Rank of 4 or ‘Sell’ rating.
 
On the other hand, VPU has amassed nearly $1.3 billion in asset base and charges 14 bps in annual fees. The fund is home to 78 securities and the top 10 companies hold about 46.4% of total assets. Here again, electric utilities take the lion’s share with 51.8%, followed by multi utilities. The ETF has a decent Zacks ETF Rank of 3 or ‘Hold’ rating.
 
Retail ETFs
 
Some retailers could see an uptick in demand. These include space heaters, shovels, snow blowers, apparels, and other cold-weather accessories. This would lead to higher stock prices and investors could well tap this opportunity through SPDR S&P Retail ETF (XRT) and Market Vectors Retail ETF (RTH).   
 
XRT provides diversified exposure to the basket of 104 retail stocks as none of these holds more than 1.13% of assets. In terms of sector holdings, the fund allocates double-digit exposure to apparel retail, specialty stores, automotive retail and Internet retail. The ETF has over $1 billion in AUM and charges 35 bps in fees and expenses (read: A Comprehensive Guide to Retail ETFs).
 
Holding 26 securities, RTH is concentrated in the top 10 securities at 59% of total assets. From a sector look, specialty retail takes the top spot at 33% while hypermarkets, departmental stores and healthcare services round off to the next three spots. The fund has managed assets of $40.5 million and has expense ratio of 0.35%.
 
Both the products have a Zacks ETF Rank of 2 or ‘Buy’ rating.
 
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FT-ISE R NAT GA (FCG): ETF Research Reports
 
MKT VEC-RETAIL (RTH): ETF Research Reports
 
US-OIL FUND LP (USO): ETF Research Reports
 
VIPERS-UTIL (VPU): ETF Research Reports
 
SPDR-SP O&G EXP (XOP): ETF Research Reports
 
SPDR-SP RET ETF (XRT): ETF Research Reports
 
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