Something old can indeed become something new and investors have seen that this week as six old HOLDRs ETFs became part of the Market Vectors ETF family. One of those six funds that made the jump from HOLDRs to Market Vectors is the Market Vectors Oil Services ETF (NYSE: OIH), one the biggest and most liquid of the six to make the switch.
OIH retains its old HOLDRs ticker, but the ETF with a 0.35% expense ratio has some new changes that could make the ETF an even more viable option for investors looking for exposure to the volatile, but often profitable oil services sector.
A frequent criticism of the old OIH was its large allocations to just two or three with stocks with one of those names being Transocean (NYSE: RIG), the world's largest provider of offshore drilling services. The big weight to Transocean was a factor we argued made the old OIH vulnerable in certain instances.
Well, the new OIH has slashed the Transocean exposure to 4.6%. However, the issue of excessive allocations to one stock hasn't been altered in the new OIH. This time around, the ETF has a weight of 19% to Schlumberger (NYSE: SLB), the world's largest provider of oilfield services.
Halliburton (NYSE: HAL) checks in at 9.8% while National Oilwell Varco (NYSE: NOV) is just over 9%. Baker Hughest (NYSE: BHI) and FMC Technologies round out the top-five holdings. Overall, the new OIH's top-10 holdings account for about 72% of the ETF's weight. For real time trading ideas go here.
This is what we'd do: Take 10% off Schlumberger's allocation and 1% each off Halliburton and National Oilwell Varco and re-distribute that 12% over the following constituents: Transocean, Core Labs (NYSE: CLB), Cameron International (NYSE: CAM), Seadrill (NYSE: SDRL), Noble (NYSE: NE), Helmerich & Payne (NYSE: HP), Diamond Offshore (NYSE: DO) and Ensco (NYSE: ESV).
Oh well. We're never consulted in the composition of ETFs by their issuers. Clearly, the idea with Van Eck converting OIH and five other HOLDRs to Market Vectors ETFs is to bolster its assets under management and make the funds more appealing to a broader swath of investors.
Time will tell if the OIH is successful in doing that, but after a couple of days, it's fair to say the new OIH is at least more attractive than the old one.
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