Welcome to part eight of my special 10-part series on the premier sector funds. This week, we’ll be looking at the increasingly important energy sector.
Consisting of everything from oil and gas industries, electric and nuclear power, renewable energy and fuel refining and distribution, the energy industry is a crucial component of modern-day living.
Our society already consumes an enormous amount of energy, and that amount is only projected to grow with the widespread introduction of energy-guzzling artificial intelligence (AI).
As a result, the need for energy has increased dramatically in an effort to keep up with growing demand. This demand bodes well for today’s fund, the Energy Select Sector SPDR Fund (XLE).
Founded in 1998 by State Street, XLE tracks a market-cap-weighted index of U.S. energy companies in the S&P 500. This differs from other funds that pull from the broad-market universe, as it excludes small-caps and most mid-caps, instead favoring large-cap stocks.
Because of this difference, XLE is able to offer liquid exposure to a market-like basket of U.S. energy firms. In the context of the energy sector, market-like means concentrated exposure to the giants in the industry, including companies in the oil, gas and consumable fuels, and energy equipment and services industries.
XLE only has 24 holdings, but these holdings consist of some of the biggest names in both the energy sector and the broader U.S. market. Its top holdings include Exxon Mobil Corporation (XOM), 21.94%; Chevron Corporation (CVX), 15.49%; ConocoPhillips (COP), 7.94%; EOG Resources, Inc. (EOG), 4.67%; Williams Companies, Inc. (WMB), 4.61%; ONEOK, Inc. (OKE), 4.30%; Kinder Morgan Inc Class P (KMI), 3.94%; Schlumberger Limited (SLB), 3.93%; Phillips 66 (PSX), 3.35% and Marathon Petroleum Corporation (MPC), 3.30%.
The fund has net assets of around $35.82 billion and a low expense ratio of 0.09%. It is up 12.60% over the last month, 4.87% in the last three months and 9.69% year to date.
Chart courtesy of Stockcharts.com.
While the energy industry looks to be getting a surge of demand, that doesn’t mean it’ll electrify every portfolio. Investors should always do their due diligence before adding any stock, fund or ETF to their portfolio.
As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.
