Comparing Two Oil Services ETFs

When it comes to sector ETFs, it is easy to understand why some sectors have multiple ETFs tracking the same industry group. Financials, retail, technology and even biotech are good examples of sectors where having multiple ETFs makes sense due to the number of companies of all sizes that qualify as members of these industries.

But oil services? Yeah, that's right. There are two ETFs tracking companies like Schlumberger (NYSE: SLB), Baker Hughes (NYSE: BHI) and Halliburton (NYSE: HAL), etc. They are the Oil Services HOLDRs (AMEX: OIH), which you've probably heard of, and the iShares Dow Jones US Oil Equipment Index (NYSE: IEZ), which you may not be familiar with.

When it comes to OIH and IEZ there really is no comparison. OIH trades and average of 6.34 million shares a day while IEZ doesn't even touch 195,000 shares on an average.

A deeper look shows IEZ has a cause for concern that many of the HOLDRs ETFs usually feature, but is absent from OIH. That is an overweight to just one or two constituents. On its own, Schlumberger accounts for more than 22% of IEZ's weight, but accounts for less than 12% of OIH's weight.

Throw in Halliburton to IEZ's mix and two companies account for more than 32% of the ETF's total weight. To be fair, there are not a lot of companies that qualify as "oil services" providers and three companies account for more than a third of OIH's weight, but that's still better than what you get with IEZ.

The bottom line is that if you want in on this sector, a good idea if oil prices continue to go higher, OIH is the vastly superior bet. Ignore IEZ, an ETF that probably shouldn't exist in the first place.