These ETFs Should Enjoy An Anadarko Takeover

On Monday, Benzinga reported that Chinese energy giant China Petroleum & Chemical Corp. SNP, frequently referred to as Sinopec, is considering a takeover of Anadarko Petroleum Corp. 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. XOM and Chevron Corp. 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 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. 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 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 COP. IEO is off more than 27 percent this year.

The $155.2 million First Trust ISE-Revere Natural Gas Index Fund 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 UNG, a futures-based product. On Monday, FCG closed barely above $4.