Will the Energy Industry Keep Outperforming the Stock Market?

Key Points

  • Despite the recent market selloff, the energy sector ETF XLE has shown strong performance, rising over 4% in the same period.
  • The energy sector’s resilience is attributed to increasing oil prices, driven by concerns about tighter global inventories following output cuts by Saudi Arabia and Russia.
  • The top-weighted holdings in the XLE ETF are Exxon Mobil (XOM), Chevron (CVX), and Schlumberger (SLB), each displaying impressive short-term performance.
  • Investors interested in the energy industry can consider the XLE ETF or the individual stocks within the ETF.

The market has experienced a significant downturn this month, with the overall market, represented by the SPDR S&P 500 ETF (NYSE: SPY), down over 3% month-to-date. However, the energy sector has shown strength, with the Energy Select Sector SPDR Fund (NYSE: XLE) up over 4% in the same period.

Despite the market volatility, the energy sector has been able to maintain an uptrend. This can be attributed to increasing oil prices driven by concerns about global inventory levels after output cuts by Saudi Arabia and Russia. As a result, the XLE ETF has performed well, rising over 4% this month and 15.35% during the quarter.

Investors looking to gain exposure to the energy industry can consider investing in the XLE ETF or individual stocks within the ETF, such as Exxon Mobil, Chevron, and Schlumberger.

Disconnect Between the Energy Sector and Overall Market

The chart above shows a disconnect between the energy sector and the overall market since August. While the market has experienced outflows, the XLE ETF has seen its share price steadily appreciate after breaking above its April high.

This divergence can be explained by the surge in crude oil prices, which have been increasing in recent weeks. The XLE ETF, which tracks the Energy Select Sector Index, has benefited from this trend and has shown strong performance.

Investors interested in the energy sector can consider the XLE ETF or individual stocks within the ETF to gain exposure to this resilient sector.

Three Top Weighted Names in XLE

The XLE ETF has three top-weighted holdings that have contributed to its performance:

Exxon Mobil (NYSE: XOM): Exxon Mobil is the top holding of the XLE ETF, with a 21.11% weighting. The stock has shown impressive performance, with a significant increase over the past month and three months. It is currently trading at a modest P/E ratio and offers a dividend yield.

Schlumberger (NYSE: SLB): Schlumberger is the third largest holding in the XLE ETF, with a 5.38% weighting. The stock has also shown strong performance over the previous three months, nearing a critical level of resistance. It offers a smaller dividend yield compared to Exxon Mobil.

Investors interested in these top-weighted holdings can consider investing in them individually or through the XLE ETF.

Leave a Reply

Ad Blocker Detected

Our website is made possible by displaying online advertisements to our visitors. Please consider supporting us by disabling your ad blocker.