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Top 10 Energy ETFs

Our goal in this profile is to help investors wade through the many competing ETF offerings available. Using our long experience as an ETF publication, we can help select those ETFs that matter and may not be repetitive. The result is a more manageable list of issues from which to choose from.

There are nearly 30 ETFs oriented to the energy sector. The following analysis features a fair representation of ETFs available. We believe from these investors may choose an appropriate ETF to satisfy the best index-based offerings individuals and financial advisors may utilize.

ETFs are based on indexes tied to well-known index providers including Russell, S&P, Barclays, MSCI, Dow Jones and so forth. Also included are some so-called "enhanced" indexes that attempt to achieve better performance through more active management of the index.

The energy sector has remains volatile and politically controversial given the recent higher spikes in prices in 2008 and 2011. The U.S. hasn't had a coherent or effective energy policy since the Department of Energy was created by the Carter Administration. The bottom line: more bureaucrats than energy. Strong economic growth and supply scarcity add to the necessity to have exposure to the sector beyond alternative issues which we'll feature separately.

Where competitive issues exist and/or repetitive issues become available at a superior fee cost saving we mention those as other choices. New issues are coming to market consistently and more often these issues need to become seasoned before they're included in our listings.

We choose to rank ETFs within the category in the following star system manner as follows:

Strong established linked index
Excellent consistent performance and index tracking
Low fee structure
Strong portfolio suitability
Excellent liquidity

Established linked index even if "enhanced"
Good performance or more volatile if "enhanced" index
Average to higher fee structure
Good portfolio suitability or more active management if "enhanced" index
Decent liquidity

Enhanced or seasoned index
Less consistent performance and more volatile
Fees higher than average
Portfolio suitability would need more active trading
Average to below average liquidity

Index is new
Issue is new and needs seasoning
Fees are high
Portfolio suitability also needs seasoning
Liquidity below average

We feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short. Premium members to the ETF Digest receive added signals when markets become extended such as DeMark indicators trigger an exit from overbought/oversold conditions.

For traders and investors wishing to hedge, leveraged and inverse issues are available to utilize from ProShares and Direxion and where available these are noted.

#1: SPDR Energy Select Sector Fund (XLE)

XLE is linked to the Energy Select Sector Index which includes oil, gas, natural gas and energy equipment and services. The fund is the oldest of its kind launched in December 1998. The expense ratio is .20%. AUM (Assets under Management) exceeds $6.3 billion and average daily trading volume is around 23 million shares. As of late November 2011 the annual dividend yield is1.34% and YTD return was -5.45%.

Both Direxion and ProShares have leveraged long and inverse ETF products available to trade against energy issues like XLE.  

XLE Top Ten Holdings & Weightings

Data as of November, 2011
  1. Exxon Mobil Corporation (XOM): 17.71%
  2. Chevron Corp (CVX): 14.86%
  3. Schlumberger NV (SLB): 7.15%
  4. ConocoPhillips (COP): 4.89%
  5. Occidental Petroleum Corporation (OXY): 4.56%
  6. Anadarko Petroleum Corp (APC): 3.15%
  7. Apache Corporation (APA): 3.05%
  8. Halliburton Company (HAL): 2.84%
  9. National Oilwell Varco, Inc. (NOV): 2.65%
  10. Baker Hughes Inc. (BHI): 2.32%

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IYE $36.40 -1.52%
FCG $22.85 -1.55%
VDE $90.44 -1.46%
IEZ $37.36 -2.35%
XLE $64.89 -1.44%


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