It is no secret that the energy sector has been one of this year’s top performers. Hone in on the second quarter, and it becomes evident that the Energy Select Sector SPDR (NYSEArca: XLE) is the best of the nine sector SPDR ETFs and the competition is not too close.
Among equity-based ETFs, energy sector ebullience has been widespread with contributions coming from cap-weighted fare such as XLE, equal-weight offerings like the Guggenheim S&P Equal Weight Energy ETF (NYSEArca: RYE) and more focused sub-industry offerings such as the Market Vectors Oil Service ETF (NYSEArca: OIH). [Oil Services Funds Lead Energy ETFs Higher]
Due to often intimate correlations to oil futures, energy ETFs that focus on exploration and production names have been key contributors to the energy ETF rally. The PowerShares Dynamic Energy Exploration & Production Portfolio (NYSEArca: PXE) is a prime example of that trend.
Although PXE is trading modestly lower at this writing, it is one of just 32 ETFs that have made new all-time highs Tuesday. The $150.4 million ETF has some overlooked advantages that have driven its 13% year-to-date gain. [Don’t Forget This Energy ETF]
Although it is not an actively managed ETF, PXE tracks the Dynamic Energy Exploration & Production Intellidex Index and that index is, well, dynamic. The index considers companies based on price momentum, earnings momentum, quality, management action, and value, according to PowerShares.
For example, PXE was previously heavily positioned in refining with four such names among its top-17 holdings. That number has dwindled to two, which is not necessarily a bad thing as pure exploration and production names have recently stood out in the energy sector rally.
On that note, PXE’s top-five holdings are EOG Resources (NYSE: EOG), Marathon Oil (NYSE: MRO), Chesapeake Energy (NYSE: CHK), Apache (NYSE: APA) and ConocoPhillips (NYSE: COP). None of those companies have refining exposure and the worst performer of that quintet over the past 90 days is Marathon, which has still managed a gain of mover than 11%.
PXE has another advantage. It is the only ETF that features RSP Permian (NYSE: RSPP) among its top-10 holdings. RSP Permian is not a household name among energy stocks, but up 5.2% today, the stock has surged 55% since its mid-January IPO. [Tempting Fundamentals With This Energy ETF]
The energy sector has been viewed as a value play this year and PXE’s valuation jibes with that view. PXE’s P/E ratio is 15.79 and price-to-book ratio of 1.73 compare favorably with the same ratios found on some cap-weighted energy ETFs. Additionally, the Dynamic Energy Exploration & Production Intellidex Index has outperformed the S&P Oil & Gas Exploration & Production over the past three yeas and five years, according to PowerShares data.
PowerShares Dynamic Energy Exploration & Production Portfolio
