ExxonMobil Corp’s (XOM) chief, Darren Woods announced on Monday (March 6, 2017) that the company will invest $20 billion to expand its manufacturing capacity and create 45000 jobs in the U.S. The new head of the state, President Trump expressed his satisfaction with the development and called Exxon a true success story. 

Exxon now looks to invest in the U.S after having located refineries close to raw material sources in the Middle East and East Asia for decades. Woods stated that these projects are export machines that produce goods, which are in great demand in high growth nations.

Exxon is investing in new refining and chemical-manufacturing projects in the U.S. Gulf Coast region to expand its manufacturing and export capacity. The company’s program consists of 11 major chemical, refining, lubricant and liquefied natural gas projects at new as well as existing facilities the company owns along the Texas and Louisiana coasts. These investments began in 2013 and are expected to continue through at least 2022 (read: Solid Sector Earnings Fail to Boost Energy ETFs).

The proposed projects or the ones in progress are expected to create more than 35,000 construction jobs and more than 12,000 full-time jobs.

The Exxon boss also emphasized how free and fair trade is essential for an economy to grow and to enhance corporate profitability in the region. However, this is contradictory to the President’s stance on the same. His take on various international trade deals, including the North American Free Trade Agreement with Canada and Mexico is different as he considers them unfair and disadvantageous to U.S. workers.

Considering these facts, we have the following ETFs to focus on:

iShares U.S. Energy ETF (IYE): This fund offers exposure to investors looking to gain from the domestic energy market. Like most funds in this sector, IYE is concentrated among its top 10 holdings, with around 65% allocated to the same. Exxon has the highest allocation, with a 22.3% holding (read: Energy ETFs Set to Soar This Earnings Season).

The fund has an expense ratio of 43 bps a year and manages $1.28 billion under AUM. It returned 18.24% over the past one year but lost 4.65% in the year-to-date time frame. As such, IYE currently has a Zacks Rank #3 (Hold) with a High risk outlook.

Vanguard Energy ETF (VDE): This fund offers broad-based exposure to the U.S. energy sector. Concentration risk is an issue just like other funds in this space, with 62.21% allocated to the top 10 holdings. Exxon occupies the top spot with a 21.92% holding (read: Energy ETF (VDE) Hits New 52-Week High).

The fund has a paltry expense ratio of 12 bps a year, making it a cheap bet to gain exposure to this sector of the economy. VDE manages $4.24 billion under AUM. The fund returned 19.85% over the past one year but has a negative return of 5.13% in the year-to-date time frame. VDE currently has a Zacks Rank #3 (Hold) with a High risk outlook.

Fidelity MSCI Energy Index ETF (FENY): The fund seeks to provide returns that correspond generally to the MSCI USA IMI Energy Index. With a 63.11% allocation to the top 10 holdings, high concentration risk is an issue. This is not something uncommon in this space. Exxon Mobil Corp has a 21.67% allocation in this fund. 

FENY is one of the cheapest funds to gain exposure to the energy industry with an expense ratio of 8 bps a year and manages around $501.7 million under AUM. The fund returned 19.44% over the past one year but generated a negative return of 4.86% in the year-to-date time frame. FENY currently has a Zacks Rank #3 (Hold) with a High risk outlook.

Bottom Line: 

Given the unprecedented move and the huge investment involved, it is difficult to determine the impact on Exxon. Therefore, it’s best to remain on the sidelines for now.