Is it worth investing in the Energy Select Sector SPDR ETF (XLE)? – May 28, 2024

If you’re interested in broad exposure to a broad segment of the Energy Select Sector stock market, look no further than the Energy Select Sector SPDR ETF (XLE – Free Report), a passively managed listed fund, launched on December 16, 1998.

Retail and institutional investors are increasingly turning to passively managed ETFs because they offer low costs, transparency, flexibility and tax efficiency; these types of funds are also a great tool for long-term investors.

Investor-friendly sector ETFs provide many opportunities to gain low risk and diversified exposure to a wide range of companies in specific sectors. Energy – Broad is one of the 16 broad Zacks Industry Sectors. It currently ranks 14th, in the bottom 13%.

Index details

The fund’s sponsor is State Street Global Advisors. It has accumulated more than $38 billion in assets, making it the largest ETF trying to match the performance of the broad Energy share market. XLE seeks to match the performance of the Energy Select Sector Index before taking into account fees and expenses.

The Energy Select sector index includes companies in the following industries: oil, gas and fuels, and energy equipment and services.

Costs

Cost is an important factor when choosing the right ETF, and cheaper funds can significantly outperform their more expensive counterparts, all other fundamentals being equal.

The annual operating costs of this ETF are 0.09%, making it one of the cheapest products on the market.

Its trailing 12-month dividend yield is 3.19%.

Sector exposure and largest assets

It’s important to dive into an ETF’s holdings before investing, despite the many advantages of this type of fund, such as diversified exposure that minimizes the risk of a single stock. Most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has the largest allocation to the energy sector – approximately 100% of the portfolio.

Looking at individual holdings, Exxon Mobil Corp (XOM – Free Report) accounts for approximately 22.78% of total assets, followed by Chevron Corp (CVX – Free Report) and Conocophillips (POLICEMAN – Free Report).

The 10 largest holdings account for approximately 76.20% of total assets under management.

Performance and risk

The ETF added approximately 9.86%, and this year and last year (as of May 28, 2024) increased by approximately 19.70%, respectively. Over the last 52 weeks, XLE has traded between $76.59 and $98.08.

The ETF has a beta of 1.25 and a standard deviation of 27.75% for the trailing three-year period, making it a high-risk pick in this space. It has approximately 26 farms and has more concentrated exposure than comparable farms.

Alternatives

The Energy Select Sector SPDR ETF carries a Zacks ETF Rank #1 (Strong Buy), which is based on asset class expected return, expense ratio, and momentum, among other factors. For this reason, XLE is an excellent option for investors seeking exposure to the Energy ETF market segment. There are other additional ETFs on the market that investors may also consider.

IShares Global Energy ETF (IXC – Free Report) tracks the S&P Global 1200 Energy Sector Index and the Vanguard Energy ETF (VDE – Free Report) tracks the MSCI US Investable Market Energy 25/50 Index. The IShares Global Energy ETF has $3.50 billion in assets and the Vanguard Energy ETF has $8.57 billion. IXC has an expense ratio of 0.44% and VDE fees of 0.10%.

Bottom line

To learn more about this product and other ETFs, find products that match your investment goals, and read articles on the latest developments in the world of ETF investing, visit the Zacks ETF Center.

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