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%

 

#2: Vanguard Energy ETF (VDE)

VDE is linked to the MSCI US Investable Market Energy 25/50 Index. The index consists of small to large companies within the overall energy sector from drillers, distributors, drilling rigs and equipment, production and marketing of oil and gas products. You'll note the index is heavily weighted by XOM at 22.5%. The fund was launched in September 2004. The expense ratio is .25%. AUM is $1.6 billion while average daily trading volume is around 190K shares. As of late November, 2011 the annual dividend yield was 1.32% with YTD performance of -6.05%.

VDE Top Ten Holdings & Weightings

Data as of November, 2011
  1. Exxon Mobil Corporation (XOM): 22.25%
  2. Chevron Corp (CVX): 11.65%
  3. Schlumberger NV (SLB): 6.57%
  4. ConocoPhillips (COP): 4.98%
  5. Occidental Petroleum Corporation (OXY): 4.52%
  6. Apache Corporation (APA): 2.72%
  7. Halliburton Company (HAL): 2.67%
  8. Anadarko Petroleum Corp (APC): 2.17%
  9. Marathon Oil Corp (MRO): 2.14%
  10. National Oilwell Varco, Inc. (NOV): 1.89%

#3: PowerShares Dynamic Energy ETF (PXI)

PXI follows the Dynamic Energy Sector Intellidex Index which is a so-called "enhanced" index strategy that evaluates constituents and modifies holdings according to quantitative valuations. The fund was launched in October 2006. The expense ratio is .60%. AUM equal $125M and average daily trading volume is around 47K shares. As of late November 2011 the annual dividend was yield .98% and the YTD return was -5.75%. (Note: we also rank this highly due to the good upside performance (14.57%) at the high in summer 2011 while the decline of YTD performance was similar to the conventional indexes. True enough, the drawdown from the highs was more impressive but you'll expect this from enhanced indexes.)

PXI Top Ten Holdings & Weightings

Data as of November, 2011

1.    Williams Partners LP (WPZ): 3.03%

2.    Exxon Mobil Corporation (XOM): 2.86%

3.    EQT Corp. (EQT): 2.80%

4.    ConocoPhillips (COP): 2.77%

5.    El Paso Corporation (EP): 2.75%

6.    Chevron Corp (CVX): 2.73%

7.    Hess Corp (HES): 2.69%

8.    FMC Technologies, Inc. (FTI): 2.58%

9.    Southwestern Energy Company (SWN): 2.58% 

10.  Devon Energy Corp (DVN): 2.46

#4: First Trust ISE-Revere Natural Gas Index Fund (FCG)

FCG follow the ISE-Revere Natural Gas Index which represents stocks of companies deriving a substantial portion of their earnings from natural gas exploration and production. The fund was launched in May 2007. The expense ratio is .60%. AUM is less than $365M and average daily trading volume is a little under 300K shares. As of late November 2011 the fund dividend was .31% and YTD return for the same period was -12%. 

Direxion Shares offers leveraged long and short ETFs to hedge or speculate linked to this and a similar index.

FCG Top Ten Holdings & Weightings

Data as of November, 2011
  1. Exxon Mobil Corporation (XOM): 3.91%
  2. Questar Corp (STR): 3.83%
  3. ConocoPhillips (COP): 3.77%
  4. Statoil ASA ADR (STO): 3.71%
  5. Royal Dutch Shell PLC ADR A (RDS.A): 3.69%
  6. Range Resources Corporation (RRC): 3.56%
  7. Southwestern Energy Company (SWN): 3.55%
  8. Anadarko Petroleum Corp (APC): 3.45%
  9. Ultra Petroleum Corporation (UPL): 3.40%
  10. Cabot Oil & Gas Corporation A (COG): 3.38%

#5: iShares S&P Global Energy Sector Index Fund (IXC)

IXC follows the S&P Global Energy Sector Index. The fund was launched November 2001. The expense ratio is higher than others at .48%. AUM is nearly $988 million and average daily trading volume is around 340K shares. As of late November 2011 the annual dividend yield was 2.22%.and YTD return over the same time period was -9.02%.   

IXC Top Ten Holdings & Weightings

Data as of November, 2011
  1. Exxon Mobil Corporation (XOM): 14.09%
  2. Chevron Corp (CVX): 7.79%
  3. BP Plc (BP.): 5.23%
  4. Royal Dutch Shell PLC (RDSA): 4.71%
  5. Total SA (FP): 4.62%
  6. Royal Dutch Shell PLC B (RDSB): 3.69%
  7. Schlumberger NV (SLB): 3.68%
  8. ConocoPhillips (COP): 3.54%
  9. Occidental Petroleum Corporation (OXY): 2.81%
  10. BG Group PLC (BG.): 2.76%

#6: SPDR S&P Oil & Gas Exploration & Production ETF (XOP)

XOP follows the S&P Oil & Gas Exploration & Production Select Industry Index. The fund was launched in June 2006. Uniquely the index is equally weighted. The expense ratio is .35%. AUM equal around $880 million and average daily trading volume is 7.7M shares. As of late November 2011 the annual dividend yield was 1.30% and YTD return was -8.06%.

XOP Top Ten Holdings & Weightings

Data as of November 2011
  1. Brigham Exploration Company (BEXP): 1.66%
  2. Approach Resources, Inc. (AREX): 1.65%
  3. Clayton Williams Energy Inc. (CWEI): 1.61%
  4. GeoResources, Inc. (GEOI): 1.59%
  5. Energy XXI (Bermuda) Ltd. (EXXI): 1.57%
  6. Northern Oil & Gas, Inc. (NOG): 1.56%
  7. Oasis Petroleum Inc (OAS): 1.56%
  8. Continental Resources Inc (CLR): 1.53%
  9. Gulfport Energy Corporation (GPOR): 1.51%
  10. Southwestern Energy Company (SWN): 1.50%

#7: iShares Dow Jones U.S. Energy Sector Index Fund (IYE)

IYE follows the Dow Jones U.S. Oil & Gas Index. The fund was launched in June 2001. The expense ratio is .48% like other iShares products. You should note a heavy concentration in weightings of XOM at nearly 24%. AUM is over $845 million while average daily trading volume is over 300K shares. As of late November 2011 the annual dividend yield was 1.49% and YTD return over the same period was -5.18%.

IYE Top Ten Holdings & Weightings

Data as of November, 2011
  1. Exxon Mobil Corporation (XOM): 24.71%
  2. Chevron Corp (CVX): 13.53%
  3. Schlumberger NV (SLB): 6.37%
  4. ConocoPhillips (COP): 5.91%
  5. Occidental Petroleum Corporation (OXY): 4.99%
  6. Anadarko Petroleum Corp (APC): 2.59%
  7. Apache Corporation (APA): 2.53%
  8. Halliburton Company (HAL): 2.27%
  9. National Oilwell Varco, Inc. (NOV): 2.00%
  10. Devon Energy Corp (DVN): 1.70%

#8: iShares Dow Jones U.S. Oil Equipment & Services Index Fund (IEZ)

IEZ follows the Dow Jones U.S. Select Oil Equipment & Services Index. The fund was launched in May 2006. The expense ratio is .48%. AUM equals around $400M and average daily trading volume is over 240K shares. As of late November 2011 the annual dividend was yield was.52% and the YTD return was -13.02%.

Investors can also evaluate XES (SPDR S&P Oil & Gas Equipment & Serves ETF) with a lower expense ratio of .35% but different constituents and weightings.

IEZ Top Ten Holdings & Weightings

Data as of November, 2011
  1. Schlumberger NV (SLB): 19.18%
  2. Halliburton Company (HAL): 9.06%
  3. National Oilwell Varco, Inc. (NOV): 8.63%
  4. Baker Hughes Inc. (BHI): 7.33%
  5. Cameron International Corporation (CAM): 4.31%
  6. Weatherford International Ltd (WFT): 4.15%
  7. FMC Technologies, Inc. (FTI): 4.01%
  8. Noble Corporation (NE): 3.62%
  9. Nabors Industries Ltd (NBR): 2.36%
  10. Helmerich & Payne, Inc. (HP): 2.31%

 

#9: First Trust Energy AlphaDEX Fund (FXN)

FXN follows the StraQuant Energy Index which is another enhanced index attempting to outperform more static indexes through quantitative analysis and rebalancing of constituents from the Russell 1000 Index. The fund was launched May 2007. The expense ratio is .70%. AUM is just over $90M and average daily trading volume is 115K shares. As of late November 2011 the annual dividend is yield was.57%. For the same time period the YTD return was -13.71%.

FXN Top Ten Holdings & Weightings

Data as of November, 2011

  1. Chevron Corp (CVX): 3.97%
  2. ConocoPhillips (COP): 3.71%
  3. Seacor Holdings Inc (CKH): 3.54%
  4. Diamond Offshore Drilling, Inc. (DO): 3.43%
  5. HollyFrontier Corp (HFC): 3.38%
  6. Exxon Mobil Corporation (XOM): 3.15%
  7. Hess Corp (HES): 3.09%
  8. Tesoro Corporation (TSO): 3.00%
  9. Marathon Oil Corp (MRO): 2.98%
  10. Murphy Oil Corporation (MUR): 2.97%

#10: Market Vectors Coal ETF (KOL)

KOL follows the Stowe Coal Index which provides exposure to companies that derive 50% or more of their revenues from the coal industry. The fund was launched in January 2008. The expense ratio is higher than average for the group at .62%. AUM equal $339M while average daily trading volume is over 306K shares. As of late November 2011 the annual dividend yield was roughly .59% and YTD return was -32%.

KOL Top Ten Holdings

Data as of November, 2011
  1. China Shenhua Energy Company Limited (01088): 9.16%
  2. Joy Global, Inc. (JOYG): 8.43%
  3. Consol Energy Inc (CNX): 8.05%
  4. Peabody Energy Corporation (BTU): 7.51%
  5. Alpha Natural Resources Inc (ANR): 5.55%
  6. Exxaro Resources Ltd (EXX): 4.88%
  7. China Coal Energy Co., Ltd. (01898): 4.51%
  8. Yanzhou Coal Mining Company Limited (01171): 4.34%
  9. Macarthur Coal Ltd. (MCC): 4.25%
  10. Adaro Energy Tbk (ADRO): 4.25%

  

New ETFs from highly regarded and substantial new providers are also being issued. These may include Charles Schwab's ETFs and Scottrade's Focus Shares which both are issuing new ETFs with low expense ratios and commission free trading at their respective firms. These may also become popular as they become seasoned. 

For further information about portfolio structures using technical indicators like DeMark and other indicators, take a free 14-day trial at ETF Digest . Follow us on Twitter and Facebook as well and join our group conversations.

You may address any feedback to: feedback@etfdigest.com   

The ETF Digest has no current positions in the featured ETFs.

(Source for data is from ETF sponsors and various ETF data providers)

 

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Dave Fry is founder and publisher of ETF Digest, Dave's Daily blog and the best-selling book author of Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management, published by Wiley Finance in 2008. A detailed bio is here: Dave Fry.

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