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Top 10 Energy ETFs

By ETF Digest (Dave Fry)ETFsMay 20, 2012 05:49AM ET
www.investing.com/analysis/top-10-energy-etfs-123733
Top 10 Energy ETFs
By ETF Digest (Dave Fry)   |  May 20, 2012 05:49AM ET
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There are nearly 30 ETFs oriented to the energy sector. The following analysis features a fair representation of ETFs available. We believe from these investors may choose an appropriate ETF to satisfy the best index-based and “enhanced” linked index offerings individuals and financial advisors may utilize.

The energy sector remains volatile and politically controversial given the recent higher spikes in prices in 2008 and 2011. In early 2012 the situation with Iran kept crude oil and some distillate prices high. Suddenly a confluence of events in early May took place that has shaken global equity markets throughout all sectors including energy.

Eurozone problems have bobbed to the surface once again. After the European Central Bank (ECB) along with others injected nearly $1 trillion to its problem members things seemed as though they were fixed. But the austerity requirements heaped on the public was rejected by them in various elections causing the euro alliance to perhaps crumble. Countries in Europe like the UK, France, Netherlands, Greece, Italy, Spain and most of Eastern Europe are either in recession or heading in that direction. This negatively impacts demand for energy. It has a contagion effect globally driving BRIC country equity markets lower and will eventually negatively impact U.S. and other developed markets as well. The world is too interconnected for this not to occur.

Troubles with Iran can always reemerge to take center stage but for now they’re at rest.

It’s troubling the U.S. hasn’t had a coherent or effective energy policy since the Department of Energy was created by the Carter Administration over 30 years ago. The bottom line: more bureaucrats than energy with reliance and exposure to dangerous and unstable areas of the world. Easy monetary policies from central banks previously weakened the dollar which pushes commodity prices higher, but recently with eurozone in crisis the dollar has rallied driving prices lower. This has left energy sectors much weaker..

We feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short.

For traders and investors wishing to hedge, leveraged and inverse issues are available to utilize from ProShares and Direxion and where available these are noted.

10
10

KOL follows the Stowe Coal Index which provides exposure to companies that derive 50% or more of their revenues from the coal industry. The fund was launched in January 2008. The expense ratio is higher than average for the group at 0.62%. AUM equal $177M while average daily trading volume is over 232K shares. As of May 2012 the annual dividend yield is 1.67% and YTD return was -12.50%. The 1 YR return was -38.43%.

After the Fukushima nuclear disaster utility providers have abandoned nuclear. In Japan and elsewhere the quick fix has been toward coal. This is dissatisfying to environmentalists but the utilities have little choice since natural gas production has been stymied. Wind and solar aren’t at a level where they can produce enough power. The current U.S. administration is not coal friendly which compounds the problem for this sector. You’ll note in the holdings a high percentage of Chinese companies. They’re reputed to be opening a new coal plant every week and paying no attention to air quality. If you’ve been there you’ll know.

KOL Top Ten Holdings and Weightings

Data as of May 2012

· China Shenhua Energy Company Limited (01088): 8.16%
· Joy Global, Inc. (JOY): 7.82%
· Peabody Energy Corporation (BTU): 7.69%
· Consol Energy Inc (CNX): 7.09%
· Alpha Natural Resources Inc (ANR): 6.04%
· Exxaro Resources Ltd (EXX): 5.40%
· Bumi Resources Tbk (BUMI): 5.07%
· Yanzhou Coal Mining Company Limited (YZCHF): 4.86%
· China Coal Energy Co., Ltd. (01898): 4.75%
· PT Adaro Energy Tbk (ADRO): 4.32%
KOL CHART
KOL CHART


9
9

FXN follows the StraQuant Energy Index which is another enhanced index attempting to outperform more static indexes through quantitative analysis and rebalancing of constituents from the Russell 1000 Index. The fund was launched May 2007.

The expense ratio is 0.70%. AUM is just over $81M and average daily trading volume is 46K shares. As of May 2012 the annual dividend yield is 0.49% and YTD return -7.51%. The 1 YR return was -21.32%.

FXN Top Ten Holdings and Weightings

Data as of May 2012

· Marathon Petroleum Corp (MPC): 4.15%
· Valero Energy Corporation (VLO): 3.90%
· Diamond Offshore Drilling, Inc. (DO): 3.85%
· Tesoro Corporation (TSO): 3.66%
· Apache Corporation (APA): 3.54%
· Exxon Mobil Corporation (XOM): 3.26%
· Oil States International, Inc. (OIS): 3.26%
· Chevron Corp (CVX): 3.21%
· Continental Resources Inc (CLR): 2.98%
· Cimarex Energy Company (XEC): 2.83%
FXN CHART
FXN CHART

8
8

IEZ follows the Dow Jones U.S. Select Oil Equipment & Services Index. The fund was launched in May 2006. The expense ratio is 0.48%. AUM equals around $406M and average daily trading volume is over 175K shares. As of May 2012 the annual dividend yield is 0.27% and YTD return was -6.05%. The 1 YR return was -19.34%.

Investors can also evaluate SPDR S&P Oil & Gas Equipment & Service ETF (XES) with a lower expense ratio of 0.35% but different constituents and weightings.

IEZ Top Ten Holdings and Weightings

Data as of May 2012

· Schlumberger NV (SLB): 20.77%
· National Oilwell Varco, Inc. (NOV): 9.24%
· Halliburton Company (HAL): 9.22%
· Baker Hughes Inc. (BHI): 6.17%
· Cameron International Corporation (CAM): 4.49%
· FMC Technologies, Inc. (FTI): 4.11%
· Weatherford International Ltd (WFT): 3.88%
· Noble Corporation (NE): 3.77%
· Oceaneering International (OII): 2.42%
· Helmerich & Payne, Inc. (HP): 2.18%
IEZ CHART
IEZ CHART


7
7

YE follows the Dow Jones U.S. Oil & Gas Index. The fund was launched in June 2000. The expense ratio is 0.48% like other iShares products. You should note a heavy concentration in weightings of XOM at nearly 24%.

AUM is over $851M while average daily trading volume is over 199K shares. As of May 2012 the annual dividend yield is 1.11% and YTD return was -4.27%. The 1 YR return was -8.69%.

IYE Top Ten Holdings and Weightings

Data as of May 2012

· Exxon Mobil Corporation (XOM): 25.92%
· Chevron Corp (CVX): 13.76%
· Schlumberger NV (SLB): 6.32%
· ConocoPhillips (COP): 5.69%
· Occidental Petroleum Corporation (OXY): 4.63%
· Apache Corporation (APA): 2.40%
· Anadarko Petroleum Corp (APC): 2.38%
· National Oilwell Varco, Inc. (NOV): 2.07%
· Halliburton Company (HAL): 2.04%
· EOG Resources (EOG): 1.93%

IYE Region Breakdown
IYE CHART
IYE CHART


6
6

XOP follows the S&P Oil & Gas Exploration & Production Select Industry Index. The fund was launched in June 2006. Uniquely the index is equally weighted. The expense ratio is 0.35%. AUM equal around $758M and average daily trading volume is 4.7M shares.

As May 2012 the annual dividend yield is 11.12% and YTD return 3.59%. The 1 YR return was -3.75%.

XOP Top Ten Holdings and Weightings

Data as of First Quarter 2012

·Sunoco, Inc. (SUN): 1.85%
·Comstock Resources, Inc. (CRK): 1.74%
·GeoResources, Inc. (GEOI): 1.68%
·CVR Energy, Inc. (CVI): 1.66%
·Oasis Petroleum Inc (OAS): 1.61%
·Pioneer Natural Resources Company (PXD): 1.61%
·EXCO Resources, Inc. (XCO): 1.59%
·Range Resources Corporation (RRC): 1.58%
·Forest Oil Corp (FST): 1.58%
·World Fuel Services Corporation (INT): 1.58%

XOP Region Breakdown
IYE CHART
IYE CHART


5
5

IXC follows the S&P Global Energy Sector Index. The fund was launched November 2001. The expense ratio is higher than others at 0.48%.

AUM is nearly $1,127M and average daily trading volume is around 229K shares. As of May 2012 the annual dividend yield is 2.37% and YTD return was -5.24%. The 1 YR return was -5.42%.

IXC Top Ten Holdings and Weightings

Data as of May 2012

· Exxon Mobil Corporation (XOM): 14.99%
·Chevron Corp (CVX): 7.75%
·BP Plc (BPAQF): 5.06%
·Royal Dutch Shell PLC (RYDAF): 4.70%
·Total SA (FP): 4.15%
·Schlumberger NV (SLB): 3.65%
·Royal Dutch Shell PLC B (RDSB): 3.65%
·ConocoPhillips (COP): 3.37%
·BG Group PLC (BG.): 2.95%
·Occidental Petroleum Corporation (OXY): 2.74%

IXC Region Breakdown
IXC CHART
IXC CHART


4
4

FCG follow the ISE-Revere Natural Gas Index which represents stocks of companies deriving a substantial portion of their earnings from natural gas exploration and production. The fund was launched in May 2007. The expense ratio is 0.60%. AUM is less than $374M and average daily trading volume is 465K shares. As of May 2012 the annual dividend yield is 0.47% and YTD return was -11.11%. The 1 YR return was -23.69%.

Direxion Shares offers leveraged long and short ETFs to hedge or speculate linked to this and a similar index.

FCG Top Ten Holdings and Weightings

Data as of May 2012

· Comstock Resources, Inc. (CRK): 3.90%
· Noble Energy Inc (NBL): 3.81%
· Petroquest Energy, Inc. (PQ): 3.73%
· Devon Energy Corp (DVN): 3.72%
· Encana Corp (ECA): 3.71%
· Questar Corp (STR): 3.67%
· Newfield Exploration Company (NFX): 3.66%
· Statoil ASA ADR (STO): 3.63%
· EOG Resources (EOG): 3.63%
· Ultra Petroleum Corporation (UPL): 3.63%

FCG Region Breakdown
FCG CHART
FCG CHART

3
3

PXI follows the Dynamic Energy Sector Intellidex Index which is a so-called “enhanced” index strategy that evaluates constituents and modifies holdings according to quantitative valuations. The fund was launched in October 2006. The expense ratio is 0.60%. AUM equal $127M and average daily trading volume is around 58K shares. As of May 2012 the annual dividend yield is 0.64% and YTD return was -0.63%. The 1 YR return was -6.74%.

(Note: we also rank this highly due to the good upside performance (14.57%) at the high in summer 2011 while the decline of YTD performance was similar to the conventional indexes. The drawdown from the highs was more impressive but you’ll expect this from enhanced indexes. This just makes trading using DeMark monthly indicators more important and the result more impressive.)

PXI Top Ten Holdings and Weightings

Data as of May 2012

· Kinder Morgan, Inc. (KMI): 3.12%
· Valero Energy Corporation (VLO): 2.83%
· Marathon Petroleum Corp (MPC): 2.71%
· ConocoPhillips (COP): 2.68%
· Spectra Energy Corp (SE): 2.67%
· Exxon Mobil Corporation (XOM): 2.66%
· Chevron Corp (CVX): 2.64%
· Enterprise Products Partners LP (EPD): 2.61%
· Plains All American Pipeline LP (PAA): 2.56%
· National Oilwell Varco, Inc. (NOV): 2.48%
PXI Region Breakdown

PXI CHART
PXI CHART


2
2

VDE is linked to the MSCI US Investable Market Energy 25/50 Index. The index consists of small to large companies within the overall energy sector from drillers, distributors, drilling rigs and equipment, production and marketing of oil and gas products. You’ll note the index is heavily weighted by XOM at 24.8%.

The fund was launched in September 2004. The expense ratio is 0.19%. AUM is $1,783M while average daily trading volume is around 116K shares. As of May 2012 the annual dividend yield is 1.65% and YTD return was -4.20%. The 1 YR return was -9.04%. VDE trades commission free at Vanguard.

VDE Top Ten Holdings and Weightings

Data as of First Quarter 2012

· Exxon Mobil Corporation (XOM): 23.61%
· Chevron Corp (CVX): 12.58%
· ConocoPhillips (COP): 5.19%
· Schlumberger NV (SLB): 5.06%
· Occidental Petroleum Corporation (OXY): 4.44%
· Anadarko Petroleum Corp (APC): 2.41%
· Apache Corporation (APA): 2.21%
· Halliburton Company (HAL): 2.02%
· National Oilwell Varco, Inc. (NOV): 1.84%
· EOG Resources (EOG): 1.69%

VDE Region Breakdown

VDE CHART
VDE CHART


1
1

XLE is linked to the Energy Select Sector Index which includes oil, gas, natural gas and energy equipment and services. The fund is the oldest of its kind launched in December 1998. The expense ratio is 0.18%. AUM exceeds $6,777M and average daily trading volume is around

14M shares. As of May 2012 the annual dividend yield is 1.20% and YTD return was -4.21%. The 1 YR return was -9.19%.

Both Direxion and ProShares have leveraged long and inverse ETF products available to trade against energy issues like XLE.  

XLE Top Ten Holdings and Weightings

Data as of May 2012

· Exxon Mobil Corporation (XOM): 18.85%
· Chevron Corp (CVX): 14.77%
· Schlumberger NV (SLB): 7.08%
· ConocoPhillips (COP): 4.65%
· Occidental Petroleum Corporation (OXY): 4.43%
· Apache Corporation (APA): 2.92%
· Anadarko Petroleum Corp (APC): 2.92%
· National Oilwell Varco, Inc. (NOV): 2.80%
· Halliburton Company (HAL): 2.60%
· El Paso Corporation (EP): 2.48%

XLE Region Breakdown
XLF CHART
XLF CHART


A Note on Rankings

We rank the top 10 ETF by our proprietary stars system as outlined below. However, given that we’re sorting these by both short and intermediate issues we have split the rankings as we move from one classification to another.


Strong established linked index
Excellent consistent performance and index tracking
Low fee structure
Strong portfolio suitability
Excellent liquidity


Established linked index even if “enhanced”
Good performance or more volatile if “enhanced” index
Average to higher fee structure
Good portfolio suitability or more active management if “enhanced” index
Decent liquidity


Enhanced or seasoned index
Less consistent performance and more volatile
Fees higher than average
Portfolio suitability would need more active trading


Average to below average liquidity
Index is new
Issue is new and needs seasoning
Fees are high
Portfolio suitability also needs seasoning
Liquidity below average

New ETFs from highly regarded and substantial new providers are also being issued. These may include Charles Schwab’s ETFs and Scottrade’s Focus Shares which both are issuing new ETFs with low expense ratios and commission free trading at their respective firms. These may also become popular as they become seasoned.

Disclosure: No current positions in the featured ETFs

Disclaimer: As stated with other sectors, remember ETF sponsors must issue and their interests aren’t aligned with yours. They have a business interest and wish to have a competitive presence in any popular sector.

Top 10 Energy ETFs
 

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Top 10 Energy ETFs

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