Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

1 Energy ETF With an Unbelievable 55% Gain

Stock Markets May 23, 2022 13:15
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. 1 Energy ETF With an Unbelievable 55% Gain

Energy and materials are the TSX’s top two performing sectors thus far in 2022. However, the former leads the latter by a mile — +54.67% versus +7.90%. While many consider gold and other precious metals as safety nets, it doesn’t reflect on the performance of mining stocks.

Meanwhile, energy stocks are unstoppable in that the favourable pricing environment has propelled many of the sector’s constituents. The same is true with exchange-traded funds (ETFs). BlackRock (NYSE:BLK) manages the iShares S&P/TSX Capped Energy Index ETF (TSX:XEG) and iShares S&P/TSX Global Gold Index (TSX:XGD) but any investor would be inclined to pick the energy ETF today.

Long-term capital growth XGD isn’t a mediocre choice, given the fund’s total return in 3.01 years is 70.2% (19.32% CAGR). The basket contains 48 global securities of producers of gold and related products. While Canadian stocks (65.46%) dominate the portfolio, it also holds U.S. (25.38%) and South African (8.25%) stocks.

Newmont, Barrick Gold (NYSE:GOLD), and Franco Nevada are the top three holdings. BlackRock, through XGD, seeks to provide long-term capital growth by replicating the performance of the S&P/TSX Global Gold Index. The rebalancing of stocks in the fund is every quarter. Last, XGD pays a modest 1.42% dividend on a semi-annual basis.

Unbelievable gain While XGD displays resiliency with its 3.45% year-to-date gain, XEG is up 55.81%. Also, the outperformance belies BlackRock’s high-risk rating for the ETF. At $16.40 per share, the trailing one-year price return is 107.19%. Moreover, the total return in 3.01 years is 84.29% (22.51% CAGR).

XEG is purely Canadian with 24 stocks representing players in oil & gas exploration & production (54.58%), integrated oil & gas (44.61%), and oil & gas equipment & services (0.61%) industries. The top three holdings are Suncor Energy (TSX:SU) (26.11%), Canadian Natural Resources (TSX:CNQ) (22.39%), and Cenovus Energy (TSX:CVE) (12.81%).

Other holdings include the TSX’s high flyers, such as NuVista Energy (TSX:NVA), Cenovus Energy, Birchcliff Energy, and Vermilion Energy (TSX:VET). XEG also seeks long-term capital growth like XGD, except that it replicates the performance of the S&P/TSX Capped Energy Index. But unlike the XGD, the dividend payout is quarterly. The current yield is 1.84%.

Interestingly, XEG doesn’t own shares of pipeline operators like Enbridge (TSX:ENB), TC Energy (TSX:TRP), and Pembina Pipeline (TSX:PPL). The trio are among the high-yield stocks in the energy sector. Perhaps either one can be your core holding with the ETF as backup.

Inflation protection XEG and XGD are solid prospects if you desire commodity ETFs. You spread the risks with several oil producers and precious metals miners in one basket. Furthermore, BlackRock’s investment objective and strategy are straightforward and transparent.

Performance-wise, both ETFs outperform the broader market year to date. BlackRock expects inflation to stay higher for longer and is ready to navigate the new regime.

The fund manager recommends the multi-asset approach, if not careful selection of equity allocations, particularly an asset class that offers inflation protection. At the moment, XEG is the better commodity ETF if you seek an inflation hedge and long-term capital growth. Moreover, XEG’s historical performance is proof of resiliency.

The post 1 Energy ETF (NYSE:XLE) With an Unbelievable 55% Gain appeared first on The Motley Fool Canada.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends CDN NATURAL RES, Enbridge, PEMBINA PIPELINE CORPORATION, and VERMILION ENERGY INC.

This Article Was First Published on The Motley Fool

1 Energy ETF With an Unbelievable 55% Gain

Related Articles

Analysts Positive Following CarMax Earnings Last Week
Analysts Positive Following CarMax Earnings Last Week By - Jun 27, 2022

By Sam Boughedda CarMax (NYSE:KMX) reported first-quarter results Friday, topping revenue estimates but missing earnings expectations. The company posted adjusted earnings of $1.56...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
Sign up with Email