On the other hand, there is no denying that XLE and VDE are cheap and their three-year performances are solid. XLE charges 0.18% per year and VDE is even cheaper at 0.14%. The two ETFs generated average returns of 55% over the past 36 months compared to just 4.8% for the U.S. Oil Fund (NYSEArca: USO).
This year, however, XLE and VDE have both lagged the S&P 500 despite higher oil prices and soaring U.S. oil output. XLE and VDE lagging the broader market can be in part attributed to the ETFs’ excessive weights to Dow components Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX). For example, XLE allocates a combined 29.6% of its weight to the two largest U.S. oil companies. Despite the heft of Exxon and Chevron, the two have lagged the broader market this year. Exxon Mobil has actually lost 2.7%. [Shale Revolution Boosts Obscure Energy ETF]
Energy Select Sector SPDR
ETF Trends editorial team contributed to this post.