Investors interested in buying broad, simple exposure to energy stocks have plenty of cheap options in the exchange-traded fund world, such as the Energy Select Sector SPDR Fund (ticker: XLE) or the Vanguard Energy ETF ( VDE). But investors looking for a more tactical approach — and potentially a lot more upside — are better off digging into some of the less-lit corners of the ETF market.
Below are nine ETFs that not only invest in energy stocks but add something extra — whether that’s wide energy exposure with a twist or a more targeted, industry-specific focus that allows you to play specific themes.
Fidelity MSCI Energy Index ETF (FENY). This energy ETF has the simplest twist of all: the lowest price.
[See: 7 of the Best Stocks to Buy for 2017.]
That’s right — the cheapest energy ETF to buy isn’t one of the ubiquitous SPDRs, nor from Vanguard’s stable of low-cost funds. It’s FENY, which at 0.084 percent in fees is 1.6 basis points less expensive than the next-cheapest fund, the VDE.
Past that, this Fidelity ETF is similar to the other giants, investing heavily in the likes of Exxon Mobil Corp. ( XOM), Chevron Corp. ( CVX) and Schlumberger ( SLB). But FENY, which came to life less than four years ago, hides in plain sight, with just $460 million in assets versus several billion for its larger competitors.
Expenses: 0.084 percent (or $8.40 per $10,000 invested)
Guggenheim S&P 500 Equal Weight Energy ETF (RYE). Rather than overweighting stocks such as Exxon and Chevron, Guggenheim’s RYE invests in all Standard & Poor’s 500 index energy stocks equally, allowing investors to enjoy more of the explosive upside potential of the smaller index components.
Weightings are rarely completely even because they shift thanks to stock movement after each quarterly rebalancing. Still, with Chesapeake Energy Corp. ( CHK) and EQT Corp. ( EQT) held at just 3.4 percent and 3.1 percent as of this writing, you can clearly see the parity this fund provides.
Expenses: 0.4 percent
First Trust Natural Gas ETF (FCG). If you want a purer play on natural gas that backs out a lot of the oil stocks you get in most broad energy funds, you could turn to the First Trust Natural Gas ETF.
The FCG tracks an index of companies that that derive a “substantial” portion of revenues from the exploration and production (or E&P) of natural gas, with a 15-85 split between master limited partnerships and non-MLPs. At the moment, top holdings include Anadarko Petroleum Corp. ( APC) and Devon Energy Corp. ( DVN), at just more than 6 percent weights each.
Expenses: 0.6 percent (includes 2-basis-point fee waiver)
VanEck Vectors Unconventional Oil & Gas ETF (FRAK). Tethered to the natural gas idea is FRAK, a fund dedicated to companies involved in E&P, development or extraction of “unconventional” oil and natural gas — basically, those with large fracking operations.
FRAK has some upside potential from M&A because fracking firms offer attractive, cheap ways to add production capacity. However, this fund’s fate is most heavily connected to natural gas prices, and the fund has a lot of overlap in holdings with FCG, including APC and DVN.
EOG Resources, which in 2016 said it would boost its planned fracking by 30 percent, is the top holding at nearly 8 percent.
Expenses: 0.54 percent (includes 18-basis-point fee waiver)
VanEck Vectors Coal ETF (KOL). Once upon a time, the KOL fund of publicly listed coal companies was a red-hot mover, more than quadrupling between the 2009 market lows and a peak in mid-2011.
Since that point, this fund as tanked by a little more than 70 percent as the regulatory environment — and utilities switching to cleaner, cheaper natural gas — crushed coal companies. Still, KOL has thrived since the election of President Donald Trump amid promises that he’ll loosen regulations and return jobs to the coal mining industry.
Top holdings of this heavily concentrated energy ETF include Canada’s Teck Resources ( TECK) and Australia’s Aurizon Holdings.
Expenses: 0.59 percent (includes 7-basis-point fee waiver)
[See: The 25 Best Blue-Chip Stocks to Buy for 2017.]
Global X MLP ETF (MLPA). Global X’s MLP ETF isn’t a member of its “SuperDividend” family of funds focused on high-yielding assets, but it at least belongs in spirit.
The fund invests in 24 master limited partnerships involved in midstream energy operations — so, pipelines and storage. These are high-yielding stocks — such as MLP mainstays Enterprise Products Partners LP ( EPD) and Energy Transfer Partners LP ( ETP) — that pay out high percentages of their income as dividend-like “distributions” to shareholders in exchange for certain tax advantages. That’s why MLPA yields a thick 7.7 percent.
Most important, its fees are about half of the industry average.
Expenses: 0.45 percent
PowerShares WilderHill Clean Energy Portfolio ETF (PBW). The PBW invests in companies that are “engaged in the business of advancement of cleaner energy and conservation,” which gives the fund a pretty wide berth. That leads to a holdings list that includes typical solar players like JA Solar Holdings Co. ( JASO) and Canadian Solar ( CSIQ), but also hydrogen fuel-cell maker Plug Power ( PLUG), wind blade firm TPI Composites ( TPIC), EV maker Tesla ( TSLA) and even Chilean plant nutrient producer Sociedad Quimica y Minera de Chile S.A. ( SQM). While PBW doesn’t have one particular bent, it generally benefits from the global shift toward cleaner fuel sources.
Expenses: 0.7 percent (includes 6-basis-point fee waiver)
First Trust ISE Global Wind Energy Index Fund (FAN). Between 2015 and 20230, the Global Wind Energy Council expects wind power production to nearly double, surging from 432.9 gigawatts to 792 GW. That bodes well for the FAN ETF, which divides its components into two groups — companies exclusively tied to the wind industry (66.67 percent) and companies that are merely “significant participants” but not exclusively in the wind business.
Top holdings are pure plays such as Denmark’s Vestas Wind Systems (9.8 percent) and Spain’s Iberdrola (7.9 percent), but further down you’ll see companies like General Electric Co. ( GE) — which produces turbines, but has many non-wind operations — with smaller weights in the fund.
Expenses: 0.6 percent (includes 14-basis-point fee waiver)
[See: 7 of the Best ETFs to Own in 2017.]
SPDR S&P International Energy Sector ETF (IPW). There are surprisingly few international-focused energy ETFs despite the fact that there’s a wealth of options in numerous regions across the globe.
Just consider the big-name top holdings of iShares’ IPW, which include Royal Dutch Shell ( RDS.A) at a combined 18.7 percent, France’s Total SA ( TOT) at 10.7 percent and the U.K.’s BP plc ( BP) at 9.3 percent — all $100 billion-plus companies.
Almost all of IPW is invested in pure-play energy producers and developers, with just a small single-digit weighting in services. Also, IPW’s blue-chip-heavy makeup helps fuel a nearly 4 percent dividend.
Expenses: 0.4 percent
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