About two months ago, Geary Advisors made headlines by launching the Oklahoma ETF (OOK), the first state-specific exchange-traded product available to U.S. investors. OOK is linked to the SPADE Oklahoma Index, a modified market capitalization-weighted benchmark that seeks to measure the performance of publicly-traded companies whose corporate headquarters are located in the state of Oklahoma.
Following the launch of OOK, we noted that the index on which this ETF is based has a stellar performance history, beating the S&P by a wide margin with an impressive consistency (read that complete analysis). It is perhaps difficult to pinpoint the reason for the big gains of Oklahoma-based stocks, but there are a number of potential explanations. The state is consistently ranked among the most “business friendly” in the union, due in part to relatively low taxes. While Oklahoma has historically been dominated by oil and gas firms, the economy has broadened in scope significantly in recent years, and is now spread across health care, education, financial, and other sectors.
OOK’s launch was greeted with a fair amount of skepticism, but its performance since inception has been impressive, and should go a long ways towards rebutting any criticisms. In its first two months of trading, OOK has gained about 7%, putting it a whopping 250 basis points ahead of the S&P 500 SPDR (SPY) over that period. And OOK’s outsized gains can’t simply be attributed to strength in the energy sector — the Energy Select Sector SPDR Fund (XLE) has actually trailed the broader market over the last month, losing 0.5% since OOK began trading:
Some investors are perhaps a bit perplexed as to how a state-specific fund can fit into their portfolio, but OOK has plenty of potential uses. For those looking to overweight the energy sector, this ETF is one of the cheapest options available (an expense ratio of 0.20%, even less than XLE). While OOK is heavy in energy stocks, there’s a lot more to this fund than oil and gas, as major components include Sonic Corp., Pre-Paid Legal Services, and Southwest Bancorp , among others. In a sense, OOK is to the energy industry what QQQQ is to the tech sector, offering a strong tilt with some degree of diversification.
For investors bullish on the long-term outlook for natural gas, OOK is certainly worth a look, as it offers exposure to companies engaged in the production and transfer of the gas while avoiding the potential pitfalls of UNG. Daily volumes for OOK remain relatively light, indicating that investors interested in this fund may want to use limit orders to establish their initial position.
Disclosure: No positions at time of writing.