Should You Invest in the Energy Select Sector SPDR ETF (XLE)?
Sector ETF report for XLE
The Energy Select Sector SPDR ETF (XLE) was launched on 12/16/1998, and is a passively managed exchange traded fund designed to offer broad exposure to the Energy - Broad segment of the equity market.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 7, placing it in top 44%.
The fund is sponsored by State Street Global Advisors. It has amassed assets over $26.07 billion, making it the largest ETF attempting to match the performance of the Energy - Broad segment of the equity market. XLE seeks to match the performance of the Energy Select Sector Index before fees and expenses.
The Energy Select Sector Index includes companies from the following industries: oil, gas & consumable fuels and energy equipment & services.
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.12%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 4.20%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Energy sector--about 100% of the portfolio.
Looking at individual holdings, Exxon Mobil Corporation (XOM) accounts for about 22.58% of total assets, followed by Chevron Corporation (CVX) and Schlumberger Nv (SLB).
The top 10 holdings account for about 71.79% of total assets under management.
Performance and Risk
The ETF has added roughly 52.89% so far this year and is up about 54.23% in the last one year (as of 12/30/2021). In that past 52-week period, it has traded between $37.90 and $59.14.
The ETF has a beta of 1.66 and standard deviation of 40.42% for the trailing three-year period, making it a high risk choice in the space. With about 24 holdings, it has more concentrated exposure than peers.
Energy Select Sector SPDR ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, XLE is a reasonable option for those seeking exposure to the Energy ETFs area of the market. Investors might also want to consider some other ETF options in the space.
IShares U.S. Energy ETF (IYE) tracks Dow Jones U.S. Oil & Gas Index and the Vanguard Energy ETF (VDE) tracks MSCI US Investable Market Energy 25/50 Index. IShares U.S. Energy ETF has $2.46 billion in assets, Vanguard Energy ETF has $5.89 billion. IYE has an expense ratio of 0.41% and VDE charges 0.10%.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Energy Select Sector SPDR ETF (XLE): ETF Research Reports
Chevron Corporation (CVX): Free Stock Analysis Report
Exxon Mobil Corporation (XOM): Free Stock Analysis Report
Schlumberger Limited (SLB): Free Stock Analysis Report
iShares U.S. Energy ETF (IYE): ETF Research Reports
Vanguard Energy ETF (VDE): ETF Research Reports
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