CRAK takes advantage of crack spreads
In a press release, Brandon Rakszawski, product manager for Van Eck Global, said, “The profitability of refiners is generally influenced by the spread between the cost of crude oil and the prices at which refined products can be sold, commonly known as crack spreads.”
Rakszawski went on to say, “Oil refiners have tended to react differently to the price of oil compared to other energy sector companies. Historically, the return profile is differentiated from other segments of the sector, a trend that has persisted year-to-date.”
High current crack spreads and positive returns from the refining sub-sector guided Van Eck to concentrate CRAK’s holdings in the sector’s top refining companies, including Phillips 66 (PSX), Marathon Petroleum (MPC), and Valero Energy (VLO).
CRAK’s holdings: A detailed overview
CRAK’s overall holdings are spread throughout the energy sector, with the vast majority of its holdings concentrated in the refining sub-sector. CRAK has a total of 26 holdings, including cash, with no single holding comprising more than 10% of its portfolio.
Many of CRAK’s 26 holdings will be familiar to energy sector investors. CRAK’s top ten, for example, include HollyFrontier (HFC), Western Refining (WNR), Marathon Petroleum (MPC), Phillips 66 (PSX), Valero Energy (VLO), and Tesoro (TSO).
These companies, along with a few more, comprise ~50% of CRAK’s total assets. In comparison, the Energy Select Sector SPDR ETF (XLE) holds more in the production and oil and gas exploration sub-sectors.
CRAK may suffer from company-specific risks
CRAK is heavily concentrated on its top holdings, with allocations ranging from 4% to 9%. Refining firms, including Phillips 66 (PSX), Marathon Petroleum (MPC), and Valero Energy (VLO), collectively make up 25% of its portfolio.
A rise in crude oil prices would have a direct impact on refining companies’ returns. This, in turn, would have a major impact on CRAK.