Assets Up, Prices Down For Energy Sector ETFs
Monday June 5, 7:00 pm ET
Marie Beerens
More money flocked to energy ETFs in May amid oil-price and stock-market swings.
Net assets of Energy Select Sector SPDR (AMEX:XLE - News) surged 26% during the month. By comparison, Financial Select Sector SPDR (AMEX:XLF - News) suffered a 20% outflow.
"What's interesting is that the energy sector is less than 10% of the S&P 500 ... yet it's 27% of assets of our trust," said Dan Dolan, director of wealth management strategies, Select Sector SPDRs.
These ETFs represent the nine sectors of the S&P 500. "It's not only an indication of long interest, it's clearly a lot of short interest that builds up."
After peaking at $75.35 a barrel at the end of April, crude has slipped closer to $70 in recent weeks, sending energy ETFs lower. But the sector is still among the best long-term performers.
Energy Sector Grows
"The energy sector 25 years ago was 28% of the S&P 500 and then it got down to about 6% five or six years ago," Dolan said. It is now at 9.9%. "It's had a nice run and everyone is worried: Is it done, is it overcooked? Looking at it historically, it's not there yet."
Oil Services Holdrs (AMEX:OIH - News) is the best-performing energy ETF with a year-to-date return of 21% and 64% over 12 months through June 2.
Baker Hughes (NYSE:BHI - News), its top holding, comprises 12% of the $1.6 billion fund's market cap. It dashed up 46% this year and 90% in the past 12 months. Second-largest holding Halliburton (NYSE:HAL - News) sprang 25% and 78% respectively. Weatherford International (NYSE:WFT - News) vaulted 49% and 104% during the same periods.
The next-best performing ETF is Energy SPDR. It has a 13% year-to-date and a 35% 12-month return under its belt.
The performance gap between the two funds stems from weakness among top holdings in the latter.
Drag On Performance
Exxon Mobil (NYSE:XOM - News), accounting for 16% of Energy SPDR's assets, is the worst-performing stock among the 29 constituents with a 10% return in the past 12 months.
The $370 billion market cap exploration firm's stock has been under pressure on the news about excessive management compensation and a massive $11 billion unfunded pension plan obligation.
Weatherford International, on the other hand, accounted for only 1.5% of Energy SPDR assets, while it was 6.3% of Oil Services Holdrs, contributing to its better performance.
A similar situation applies to Baker Hughes which represented only 3.8% of Energy SPDR assets vs. a 12% share of Oil Services Holdrs.
Among the three stocks, Exxon Mobil also has the worst Accumulation/Distribution Rating at D-.
Third-best energy ETF was the iShares Dow Jones US Energy (AMEX:IYE - News), with a 12% year-to-date and a 31% one-year return. It represents the Dow Jones U.S. Oil and Gas Index. Exxon Mobil holds a 20% share, followed by Chevron (NYSE:CVX - News) and Schlumberger (NYSE:SLB - News).
