Oil and gas prices soared in 2022 after Russia’s invasion of Ukraine caused economies around the world to boycott Russian resources, but they’ve since retreated as supply has normalized and rising interest rates have tempered demand. The Bloomberg Natural Gas Subindex declined 70% in the last year, while the Bloomberg Composite Crude Oil Subindex has fallen 28%.
Subsequently, the energy sector has underperformed the broader market, with the S&P Energy Select Sector Index up about 5.3%, compared with the S&P 500’s 14.6% increase.
Key Takeaways
- Energy stocks have generally underperformed the market in the last year, with the energy sector trailing the S&P 500 by nearly 10 percentage points.
- Top energy ETFs include Fidelity MSCI Energy Index ETF, SPDR S&P Oil & Gas Equipment Services ETF, and the Energy Select Sector SPDR Fund.
- These ETFs can provide broad exposure to energy companies or more targeted exposure to firms within select subindustries.
Some 50 energy ETFs trade in the United States, excluding inverse and leveraged ETFs, as well as funds with less than $50 million in assets under management (AUM).
Below we look at the three energy ETFs with the lowest fees, the highest total return over the last year, and the most liquidity. All numbers are as of June 22.
- Performance Over One Year: 15.6%
- Expense Ratio: 0.08%
- 30-Day SEC Yield: 3.32%
- 30-Day Average Daily Volume: 847,721
- Net Assets: $1.3 billion
- Inception Date: Oct. 21, 2013
- Issuer: Fidelity
FENY is a passively managed fund that tracks the MSCI USA IMI Energy index, a capitalization-weighted index of large-, mid-, and small-cap energy companies. Exxon Mobil Corp. (XOM) is the fund’s largest holding, representing almost 23% of the fund. FENY provides exposure to primarily North American oil and gas companies, but a small portion of the fund is dedicated to energy equipment.
- Performance Over One Year: 29.8%
- Expense Ratio: 0.35%
- 30-Day SEC Yield: 0.51%
- 30-Day Average Daily Volume: 85,094
- Net Assets: $261.6 million
- Inception Date: Jun. 19, 2006
- Issuer: State Street Global Advisors
XES tracks the S&P Oil & Gas Equipment & Services Select Industry Index. The fund is a modified equal-weighted fund, meaning small-cap stocks have more influence over the fund’s returns than they would in a capitalization-weighted fund holding the same stocks. The outsized influence of small-cap stocks on XES makes it inherently riskier compared with other funds, which may appeal to investors looking for greater upside potential in the energy market.
- Performance Over One Year: 14.8%
- Expense Ratio: 0.10%
- 30-Day SEC Yield: 3.76%
- 30-Day Average Daily Volume: 20,217,487
- Assets Under Management: $32.5 billion
- Inception Date: Dec. 16, 1998
- Issuer: State Street Global Advisors
XLE targets the Energy Select Sector Index, an index of U.S. companies in the oil, gas and consumable fuel, and energy equipment and services industries. The fund has a low expense ratio and high liquidity, with more than 20 million shares changing hands on an average day. More than 90% of the fund’s assets are allocated to oil, gas, and consumable fuels companies, with the rest spread among energy equipment and services companies.
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As of the date this article was written, the author does not own any of the above ETFs.
