Yahoo Finance The 10 Best Energy ETFs for an Eventual Bounce
U.S. News & World Report's best energy ETFs.
If you're an investor in energy stocks and exchange-traded funds, low gas prices are a growing ulcer. Despite a 2016 rebound, oil prices are off 60 percent from June 2014 highs, and major energy indices are off by 30 to 60 percent. While the potential for higher oil prices looks slim in the short term in the wake of a failed meeting in Doha, Qatar, the pressure is growing among oil-producing countries to lower output. And when that happens, energy stocks will be off to the races.
#10: First Trust Energy AlphaDEX Fund (FXN)
The FDN is one of First Trust's AlphaDEX funds -- a set of ETFs that use enhanced indices in an attempt to outperform the market. First Trust's Energy AlphaDEX holds 61 stocks that have been identified as either having strong value or growth characteristics, then are weighted based on the fund's proprietary ranking system. This produces a fund that's about two-thirds energy production, and roughly a third in energy equipment and services. Top holdings include SM Energy (SM) and Rowan Companies (RDC).
Expense ratio: 0.64 percent
#9: iShares U.S. Energy ETF (IYE)
The IYE is a pretty diversified fund in that it boasts 80 holdings and invests across the different "streams" and services companies. However, the fund is heavily weighted in the integrated (read:multiple streams) majors; more than 25 percent of IYE is invested in Exxon Mobil Corp. (XOM), and another 13.5 percent goes to Chevron Corp. (CVX). But the concentration in larger-cap companies has limited IYE's downside compared to many other energy funds, and provides some padding in the form of a 3.2 percent dividend yield.
Expenses: 0.43 percent.
#8: SPDR S&P Oil & Gas Exploration & Production ETF (XOP)
The harder they fall, the bigger the bounce. XOP focuses on exploration and production companies -- the "upstream" segment of energy -- and low oil prices directly weigh on profits, and in turn, the ability to fund future profits. But rebounding prices jolt holdings like SM Energy and Devon Energy Corp. (DVN), which is why the XOP is the winningest energy ETF on this list, up 17.37 percent year to date. Note: XOP is an equal-weight fund; currently, no stock is weighed larger than 2.82 percent.
Expenses: 0.35 percent.
#7: Vanguard Energy ETF (VDE)
The Vanguard Energy ETF is another broad-energy fund, and here, the Vanguard price advantage really shows in this sector. VDE's expense ratio is far lower than most of the options on this list. Like iShares' IYE, top holdings are heavily concentrated in Exxon Mobil and Chevron. But those concentrations aren't as high, and as a whole, there's a slightly more even distribution across a larger holdings base of 143 stocks. Yield is less than IYE too, though, at 2.8 percent.
Expenses: 0.1 percent
#6: iShares U.S. Oil & Gas Exploration & Production ETF (IEO)
The IEO is a more pure play on the upstream space than the XOP, as the IEO will only invest in exploration and production companies -- not integrated oil companies like XOP holdings Exxon Mobil and Chevron. As a result, top holdings in this 53-stock fund are ConocoPhillips (COP) and EOG Resources (EOG). In this case, the lack of exposure to larger-cap integrated majors hasn't hindered performance, with IEO offering less exaggerated declines (though less robust gains) than XOP.
Expenses: 0.43 percent.
#5: iShares U.S. Oil Equipment & Services ETF (IEZ)
The IEZ is way to invest in equipment and services stocks. Schlumberger Limited (SLB) and Halliburton Co. (HAL) make up roughly 30 percent of the fund this time. Also, Baker Hughes (BHI) -- which failed in an attempt to merge with Halliburton -- is a 7 percent weight. This fund will benefit from big runs in the Big Three.
Expenses: 0.43 percent.
#4: Guggenheim S&P 500 Equal Weight Energy ETF (RYE)
This equal-weight fund is dedicated to the whole sector, and the result is a balanced and solidly (though not spectacularly) performing fund that limits some downside, but not as much as other funds with big weightings in the integrated majors. The flip side is that RYE has experienced great upside amid oil's rebound, only slightly behind XOP in performance. Top holdings are Southwestern Energy Co. (SWN) and Devon Energy.
Expenses: 0.4 percent.
#3: SPDR S&P Oil & Gas Equipment & Services ETF (XES)
The XES is an equal-weight take on the oil services space, which means you don't get the monstrous overweights in Schlumberger and Halliburton. Instead, assets are very evenly invested across 33 stocks, with U.S. Silica Holdings (SLCA) and Nabors Industries (NBR) listed as the top holdings for now. The allure of this fund, then, is the diversification and not being beholden to just one or two stocks. However, the industry's smaller players have felt the most pain, weighing more heavily on XES than its peers.
Expenses: 0.35 percent.
#2: Fidelity MSCI Energy Index (FENY)
FENY and the top fund on this list are extremely similar in their weighting toward oil and gas companies (83 percent) and equipment and services firms (17 percent). But FENY is more lopsided, with Exxon Mobil making up 24.76 percent of the fund, and Chevron next at 13.05 percent. This is a young fund, launching in October 2013, so time will tell whether Fidelity's fund will maintain its high ranking.
Expenses: 0.12 percent
#1: Energy Select Sector SPDR Fund (XLE)
The SPDRs typically are the gold standard for sector exposure, ranking in the top three for most sectors. XLE is no different here at No. 1, and it's also top at assets under management, at $13.6 billion -- roughly three times the next-largest energy ETF, VDE. That's in part thanks to its great performance, besting most of the funds on this list over most time frames, and also because of its dirt-cheap expense ratio. XOM and CVX are the top holdings of this cap-weighted fund, helping to power a 3 percent yield.
Expenses: 0.14 percent
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