Energy ETFs Energized by Inflows, Low Valuations

Some well-known equity-based energy exchange traded funds have been lethargic, to put it kindly, in the first quarter of 2014.

For example, the Energy Select Sector SPDR (NYSEArca: XLE) is up just 1.3%, a middling performance among the nine sector SPDR ETFs and one that is barely better than the year-to-date returns offered by the Consumer Staples Select Sector SPDR (NYSEArca: XLP). This year, the Utilities Select Sector SPDR (NYSEArca: XLU) has been 10 times better than XLE. [Utilities ETFs Flex Their Muscles]

That does not mean ETFs such as XLE and the Vanguard Energy ETF (NYSEArca: VDE) cannot rebound. Actually, some investors are betting on just that: An energy sector ETF rally.

Investors are “putting seven times as much into exchange-traded funds as they did last quarter,” reports Jim Polson for Bloomberg.

Last year, XLE’s sluggishness combined with inflows to other sector ETFs sent the fund from third-largest of the nine SPDRs to the fifth spot. XLE has since reclaimed the fourth spot behind its financial services, technology and health care equivalents. [Health Care ETF Becomes Third-Largest SPDR]

“A key indicator is net new money from investors — or fund purchases minus redemptions. ETFs focusing on oil and gas companies have captured 20 percent of the $10 billion in net inflows into those ETFs this year. They hauled in only 2.5 percent of fresh money last quarter, and 7.7 percent in all of 2013,” writes Polson for Bloomberg.