Energy ETFs XLE and VDE stocks have hit record highs: more upside?
- The Vanguard Energy and Energy Select Sector ETFs have jumped to record highs.
- The rally happened because of the soaring crude oil prices amid OPEC+ supply cuts.
- There is a room for more upside as analysts bet that oil could hit $100 soon.
The Vanguard Energy ETF (VDE) and the Energy Select Sector SPDR Fund (XLE) have rebounded sharply recently, helped by the soaring crude oil prices. The VDE stock jumped to $130, its highest level on record. Similarly, the XLE fund has soared to its ATH of $92.81.
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XLE and VDE are some of the biggest energy ETFs in the world. The SPDR Energy Select fund has over $39.2 billion in assets while VDE has more than $8.8 billion. These funds invest in the biggest energy companies in the world.
Their key difference is that the XLE fund is more concentrated with 26 energy companies while VDE has 116 companies. XLE is also more liquid, with an average daily share volume of over 18 million compared to VDE’s 529k.
Their biggest companies are the same and include well-known companies like Exxon Mobil, Chevron, ConocoPhillips, Schlumberger, EOG Resources, and Marathon Petroleum. Because of its concentration, the top ten holdings of the XLE fund account for 73.45% of its total fund.
The two funds have similar performance. In 2023, the XLE fund has risen by 6.30% while the VDEO stock has jumped by 7.23%. The same is true in the past 12 months and five years.
The key catalyst for the VDE and XLE ETFs is that the price of crude oil is soaring. Brent, the international benchmark, has soared to $92, the highest level this year. West Texas Intermediate (WTI) jumped to $88. And as I wrote in this article, there are chances that oil will soar to $100 in the near term.
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Therefore, this trend means that oil and gas companies will continue doing well in the coming months. Most importantly, if oil remains this elevated, these companies will boost their dividends and buybacks either in Q3 or in Q4 of this year.
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I believe that anyone interested in the energy sector should invest in either XLE or VDE funds. The VanEck Oil Services ETF (OIH) is also a good – but low-yielding – fund to invest in.
The daily chart shows that the XLE ETF has been in a strong bullish trend in the past few months. Along the way, the shares have moved above all moving averages, signaling that it has momentum.
Most importantly, the fund has crossed the important resistance level at $92, the highest level in November last year. Therefore, in this case, the path of the least resistance for the shares is bullish, with the next level to watch being at $100. If this happens, the VDE fund will also continue rising because of its close correlation with the XLE.