Oil Services ETFs Revisited: PXJ

McDermott International (NYSE: MDR), a large oil services company, issued an earnings warning yesterday after the market closed.

Despite the fact that the company blamed bad weather for lower than expected Q1 results, the market today is punishing both MDR’s stock and the ETF with the highest concentration of MDR in its portfolio, the PowerShares Dynamic Oil and Gas Services Portfolio (Amex: PXJ).


There are two ways to look at this situation.

One camp would claim that the run-up in prices for oil services companies, and MDR in particular, had them priced for perfection and any misstep should be punished (see the 12 month chart below).


On the other hand, McDermott didn’t lose any backlog – the projects were just delayed. It turns out that when you are in the business of constructing large projects offshore, nature has a way of interfering with best laid plans.

Either way – read more by visiting our last post on Oil Services ETFs.

One thing to watch on PXJ – “Dynamic” means that the PowerShares managers try to beat the unmanaged index by overweighting some of the stocks in the sector using a quantitative black box. The index and fund are rebalanced quarterly, so the relative weighting of MDR within PXJ is likely to change.

Learn more about PXJ at PowerShares’ website.

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