Exposure to the Hard-Hit Energy Sector, at a Low Cost
For investors bold enough to venture into the bruised U.S. energy sector, this ETF is one of the best bargains around.
Energy Select Sector SPDR (XLE) offers broad, inexpensive exposure to the energy sector. This exchange-traded fund invests in every energy company in the S&P 500 and weights its holdings by market capitalization. This includes integrated oil and gas producers, firms that engage in oil and gas exploration and production, companies providing oil and gas equipment and services, and those in the refining and marketing segment of the value chain. From a commodity-type standpoint, firms related in some manner to oil and gas comprise more than 80% of the assets of this ETF, with equipment and services firms making up the balance. Because of this ETF's industry concentration, this fund would be most suitable as a satellite holding in a diversified portfolio.
This portfolio is top-heavy. It's dominated by a pair of heavyweights: vertically integrated supermajors Exxon Mobil (XOM) and Chevron (CVX), which together make up more than 35% of XLE's assets. While these two firms represent a large chunk of assets, they operate in a diverse set of businesses across the energy complex.
Robert Goldsborough does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.