One reason investors are getting interested in energy ETFs again is valuations. As measured by Morningstar’s price/fair value ratio as of March 21 “it appears as though current valuations look favorable in the energy sector, as four out of 10 of the cheapest exchange-traded products have ties to this segment of the market,” according to Morningstar’s Ben Johnson.
Those ETFs include XLE, VDE and the iShares U.S. Energy ETF (NYSEArca: IYE) with XLE being slightly cheaper than its two rivals.
What that says is integrated oil stocks are trading at discounts. XLE allocates a combined 29.1% of its weight to Dow components Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX), the two largest U.S. oil companies. Those stocks combine for over 34% of IYE’s weight and 33.5% of VDE.
Energy Select Sector SPDR
