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.

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 3, placing it in top 19%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $37.21 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 0.10%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 3.21%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, 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 gained about 27.44% so far this year and was up about 53.18% in the last one year (as of 03/03/2022). In that past 52-week period, it has traded between $45.79 and $72.92.

The ETF has a beta of 1.47 and standard deviation of 40.68% 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.

Alternatives

Energy Select Sector SPDR ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XLE is an excellent 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 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 $3.16 billion in assets, Vanguard Energy ETF has $7.83 billion. IYE has an expense ratio of 0.41% 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
 
Schlumberger Limited (SLB): Free Stock Analysis Report
 
iShares U.S. Energy ETF (IYE): ETF Research Reports
 
Vanguard Energy ETF (VDE): ETF Research Reports
 
To read this article on Zacks.com click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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