+ 0.75
+ 0.22%

These ETFs Should Enjoy An Anadarko Takeover

December 22, 2015 8:08 am
Share to Linkedin Share to Twitter Share to Facebook Share to Print License More

On Monday, Benzinga reported that Chinese energy giant China Petroleum & Chemical Corp. (NYSE: SNP), frequently referred to as Sinopec, is considering a takeover of Anadarko Petroleum Corp. (NYSE: APC). Texas-based Anadarko is one of the largest independent U.S. producers of oil and natural gas.


Anadarko has a long history as a potential takeover target. In 2012, Anadarko was rumored to be a possible target for both Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX), the two largest U.S. oil companies. Obviously, such a deal never came to fruition. 


Still, if news of Anadarko as a takeover target persists and gains momentum, some exchange traded funds could benefit. And in what has been a dismal year for equity-based ETFs, these funds could use the help. With a market value of just under $24 billion, Anadarko is small compared to Exxon, Chevron and some of the other oil giants that dominate popular energy Etfs. However, there are a few funds where Anadarko has notable footprints.


The Market Vectors Unconventional Oil & Gas ETF (NYSE: FRAK) has one of the largest Anadarko weights among all ETFs with a 7.2 percent allocation to the stock as of Dec. 21. That makes Anadarko FRAK's third-largest holding.


Rumors of an Anadarko represent the second time since early November one of FRAK's holdings has been the focus of takeover chatter. Last month, Apache Corp. (NYSE: APA), FRAK's fourth-largest holding at a weight of 6.3 percent, was reportedly a takeover target


FRAK has tumbled 43 percent this year. The $348.7 million iShares U.S. Oil & Gas Exploration & Production ETF (NYSE: IEO) is another ETF that could get a lift from an acquisition of Anadarko. That ETF allocates nearly 5.2 percent of its weight to Anadarko, making the stock the ETF's sixth-largest holding.


As is the case with FRAK, IEO was also stirred by the Apache rumor because that stock is also a top 10 holding in the ETF. IEO's largest allocation is an 11.5 percent weight to ConocoPhillips (NYSE: COP). IEO is off more than 27 percent this year.


The $155.2 million First Trust ISE-Revere Natural Gas Index Fund (NYSE: FCG) has a 3.4 percent weight to Anadarko, which does not sound like much until noting none of FCG's 31 holdings command a weight north of 5.1 percent.


FCG has been a dreadful performer this year, losing 63 percent, which is more than 1,300 basis points worse than the loss incurred by the United States Natural Gas Fund (NYSE: UNG), a futures-based product. On Monday, FCG closed barely above $4. 


Related Articles

Why BofA Securities Is Overweight Energy Stocks In 2021

Energy sector investors have had another brutal year in 2020, with the Energy Select Sector SPDR Fund (NYSE: XLE) on track to finish the year down more than 34%. Yet BofA Securities said this week that it is betting on a big rebound and rating the energy sector Overweight in 2021. read more

Apache, Twitter And More 'Fast Money' Picks For November 5

5 Bullish Stocks For Tuesday's Trading

Five Stocks In Clear Upward Trends