SPDR Energy (XLE) is an energy, electricity, exploration, and refinery sector ETF that constitutes just under 5% of the S&P 500.1 The sector is essential, operating 24/7 to meet the power and electricity demand of homes, businesses, and governments. XLE comprises 24 companies such as ExxonMobil (XOM), Chevron (CVX), and ConocoPhillips (COP).
The fund is highly concentrated and consists of 90.4% oil, gas, and consumable fuels such as coal and natural gas.2 The remaining 9.6% is in energy equipment and services such as drilling. Being predominantly in oil, gas, and alternatives, the ETF is a sensitive sector that is volatile and fluctuates with oil and gas prices. The sector powers the daily lives of millions of Americans from transportation to heating homes in the winter, providing steady demand in many of its industries. XLE is also experiencing emerging technologies from hydrogen fuel cells to carbon capture and storage.
XLE is subject to extensive and often changing government regulations against excessive air and water pollution and emissions. In recent years, the sector has also experienced a shift toward renewable and nondepletable energies amid climate concerns and public opinion. Energy companies also receive federal tax incentives for qualifying renewable energy projects and equipment.3 Many companies and nations have set renewable energy target goals.
Based on sector data, XLE is subject to volatility and regulation but experiences high demand. First State holds a significant position in XLE stocks ExxonMobil (XOM), Chevron (CVX), ConocoPhillips (COP), Phillips 66 (PSX), as well as the broad ETF for its client portfolios. For a free consultation or to diversify or build your portfolio, contact us today at (918) 492-1361.
Sources
1Select Sector SPDRs (Accessed Mar 15, 2023)
2State Street Global Advisors XLE The Energy Select Sector SPDR® Fund (Accessed Mar 10, 2023)
3U.S. Energy Information Administration: Renewable energy explained (Accessed Mar 15, 2023)
This overview is for informational purposes only and is not a recommendation. It should not be the sole deciding factor in making an investment. Investing is a risk and, as with all risks, a positive return is not guaranteed. Past performance does not indicate future results.