Funds that focus on specific sectors of the market give investors the ability to focus extensively on one section of the S&P 500. In this case, the sector in question is energy. The second exchange-traded fund (ETF) in our new series on SPDR’s specific sector ETFs, Energy Select Sector SPDR Fund (XLE), tracks the Energy Select Sector Index, which concerns itself primarily with companies in the oil and natural gas businesses, as well as energy equipment.
The current year has been a rough one for the energy industry, and it shows in XLE’s chart, shown below, as the company is down 11.66% year to date. However, its current dividend yield of 2.93% may be enough to attract some attention to the fund as the market hopefully emerges from its bearish trajectory. And this fund tops that off with an expense ratio of 0.14%.
XLE is also a fairly small fund, with only $12.7 million in assets managed. This amount falls beneath my recommended threshold for investment. However, this ETF’s strategy is one that is worth bringing to your attention. My view is that the more knowledge you have as an investor, the better you can make informed decisions.
XLE invests a sizeable 62.6% of its total assets in the top 10 companies it holds. Oil giants Exxon Mobile (XOM) and Chevron (CVX) are at the top of the list, with holdings of 17.96% and 12.51%, respectively. Other holdings include Schlumberger Ltd. (SLB), 7.52%; Kinder Morgan, Inc. (KMI), 4.11%; and EOG Resources, Inc. (EDG), 4.02%.
If a strong focus on the energy sector seems broadly appealing to you, you may want to take a look at Energy Select Sector SPDR Fund (XLE). In this column next week, I’ll have another sector highlighted for your consideration.
Remember to look for the current price, volume, performance and top 10 holdings of XLE at ETFU.com.
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As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.