The largest of the equity-based energy ETFs, the Energy Select Sector SPDR, is up more than 18 per cent so far this, according to a report from Nasdaq.
Comment from the stock market reveals that there is still room for upside potential for energy equities this year, and the ETFs based on them. As other firms join in on the troubled sector’s offering, there could be something of a rebound, the firm says, listing the Vanguard Energy ETF, iShares US Energy ETF and the Fidelity MSCI Energy Index ETF.
Portfolios at these energy ETFs are dominated by the largest oil companies, including Dow components Exxon Mobil, Chevron and Schlumberger, the largest oilfield services provider. Nasdaq reports that in some cases Exxon Mobil and Chevron, the two largest US oil companies, represent up to a third of the portfolios within the ETFs.
Nasdaq’s ETF commentator says that integrated oil stocks have refining exposure, a segment that benefits when oil prices are low due to improved margins. “That can help steady diversified energy ETFs like XLE because these are not dedicated exploration and production funds.”
Nasdaq quotes Ben Levisohn writing for Barron’s: "The energy sector, however, has been getting pummeled so hard for so long that this year's gains might be the beginning of a multiyear run. With valuations starting to look reasonable, and higher oil prices a possibility, opportunity still exists for investors who missed the initial rally."