Should You Invest in the Energy Select Sector SPDR ETF (XLE)?
Launched on 12/16/1998, the Energy Select Sector SPDR ETF (XLE) is a passively managed exchange traded fund designed to provide a broad exposure to the Energy - Broad segment of the equity market.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
Additionally, sector ETFs offer convenient ways 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 14, placing it in bottom 13%.
Index Details
The fund is sponsored by State Street Global Advisors. It has amassed assets over $39.05 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.
Costs
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.09%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 3.13%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. 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 Corp (XOM) accounts for about 21.83% of total assets, followed by Chevron Corp (CVX) and Eog Resources Inc (EOG).
The top 10 holdings account for about 72.39% of total assets under management.
Performance and Risk
So far this year, XLE has added roughly 12.11%, and it's up approximately 23.48% in the last one year (as of 03/27/2024). During this past 52-week period, the fund has traded between $76.59 and $93.36.
The ETF has a beta of 1.25 and standard deviation of 28.27% for the trailing three-year period, making it a high risk choice in the space. With about 26 holdings, it has more concentrated exposure than peers.
Alternatives
Energy Select Sector SPDR ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XLE is a great option for investors seeking exposure to the Energy ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
IShares Global Energy ETF (IXC) tracks S&P Global 1200 Energy Sector Index and the Vanguard Energy ETF (VDE) tracks MSCI US Investable Market Energy 25/50 Index. IShares Global Energy ETF has $3.29 billion in assets, Vanguard Energy ETF has $8.70 billion. IXC has an expense ratio of 0.44% and VDE charges 0.10%.
Bottom Line
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
EOG Resources, Inc. (EOG) : Free Stock Analysis Report
iShares Global Energy ETF (IXC): ETF Research Reports
Vanguard Energy ETF (VDE): ETF Research Reports
