Oil and gas exchange-traded funds (ETFs) offer investors more direct and easier access to the often volatile energy market than many other alternatives. While there is the potential for significant returns by investing in the oil and gas sector, the risks can be high. Oil futures, for example, tend to be volatile and often require a significant initial investment, which excludes many investors. By contrast, oil and gas ETFs offer access to a basket of energy equities. While some oil and gas ETFs track futures contracts or commodities prices, the ETFs below are solely focused on stocks.
- The oil and gas sector outperformed the broader market over the past year.
- The ETFs with the best 1-year trailing total return are XES, OIH, and FCG.
- The top holding of the first two funds is Schlumberger NV, and the top holding of the third fund is EOG Resources Inc.
The universe of oil and gas ETFs that trade in the U.S. is comprised of about 27 ETFs, excluding inverse and leveraged ETFs as well as funds with less than $50 million in assets under management (AUM). The oil and gas sector, as measured by the S&P 500 Energy Sector Index, has outperformed the broader market, posting a total return of 59.0% over the past 12 months compared to the S&P 500's total return of 47.8%. A special note that while the S&P energy index is a good general indicator, it's not a perfect match because the benchmark includes mostly, but not all, oil and gas companies. The best-performing oil and gas ETF, based on performance over the past year, is the SPDR S&P Oil & Gas Equipment & Services ETF (XES). We examine the top 3 oil and gas ETFs below. All figures throughout are as of May 17.
- Performance over 1-Year: 133.6%
- Expense Ratio: 0.35%
- Annual Dividend Yield: 1.74%
- 3-Month Average Daily Volume: 131,375
- Assets Under Management: $162.8 million
- Inception Date: June 19, 2006
- Issuer: State Street
XES targets the S&P Oil & Gas Equipment & Services Select Industry Index. The index seeks to provide exposure to the oil and gas equipment and services segment of the S&P Total Market Index. Because of its equal weighting approach, XES is more balanced than some of the other oil and gas ETFs. The top holdings of this fund include Schlumberger NV (SLB), an oilfield services company; class A shares of Liberty Oilfield Services Inc. (LBRT), an oilfield services company; and class A shares of Cactus Inc. (WHD), a manufacturer of pressure control equipment.
- Performance over 1-Year: 125.0%
- Expense Ratio: 0.35%
- Annual Dividend Yield: 0.87%
- 3-Month Average Daily Volume: 767,106
- Assets Under Management: $2.0 billion
- Inception Date: Dec. 20, 2011
- Issuer: Van Eck Associates Corp.
OIH is a multi-cap, value fund that targets the MVIS US Listed Oil Services 25 Index. The index is comprised of the 25 largest U.S.-listed companies involved in oil equipment, oil services, or oil drilling. The fund is heavily concentrated in its top positions, with the five largest holdings comprising about half of all invested assets. The top holdings for OIH include Schlumberger NV; Halliburton Co. (HAL), an oil field service company; and class A shares of Baker Hughes Co. (BKR), an oilfield products and services company.
- Performance over 1-Year: 124.9%
- Expense Ratio: 0.60%
- Annual Dividend Yield: 2.22%
- 3-Month Average Daily Volume: 1,489,590
- Assets Under Management: $203.9 million
- Inception Date: May 8, 2007
- Issuer: First Trust
FCG is a multi-cap, blended fund targeting the ISE-Revere Natural Gas Index. The index holds exchange-listed companies that derive a significant portion of revenue from the exploration and production of natural gas. Unlike OIH above, FCG allocates its investments relatively equally across its top 15 holdings. Investors should note, though, that FCG can trade as a leveraged play on underlying natural resources, making the ETF vulnerable to significant volatility. The top holdings of the fund include EOG Resources Inc. (EOG), Western Midstream Partners LP (WES), and Hess Corp. (HES), all of which are energy companies engaged in the exploration and production of natural gas and related products, directly or through subsidiaries.
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