An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy – Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 9, placing it in bottom 44%.
The fund is sponsored by Fidelity. It has amassed assets over $471.75 M, making it one of the larger ETFs attempting to match the performance of the Energy – Broad segment of the equity market. FENY seeks to match the performance of the MSCI USA IMI Energy Index before fees and expenses.
MSCI USA IMI Energy Index represents the performance of the energy sector in the U.S. equity market.
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.08%, making it the least expensive product in the space.
It has a 12-month trailing dividend yield of 3.25%.
Sector Exposure and Top Holdings
ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund’s holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Energy sector–about 99.60% of the portfolio.
Looking at individual holdings, Exxon Mobil Corp (XOM) accounts for about 23.71% of total assets, followed by Chevron Corp (CVX) and Conocophillips (COP).
The top 10 holdings account for about 67.40% of total assets under management.
Performance and Risk
Year-to-date, the Fidelity MSCI Energy Index ETF has gained about 10.70% so far, and is down about -17.05% over the last 12 months (as of 06/28/2019). FENY has traded between $14.63 and $21.82 in this past 52-week period.
The ETF has a beta of 1.17 and standard deviation of 19.55% for the trailing three-year period, making it a high risk choice in the space. With about 135 holdings, it effectively diversifies company-specific risk.
Fidelity MSCI Energy Index ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FENY is a good option for those seeking exposure to the Energy ETFs area of the market. Investors might also want to consider some other ETF options in the space.
Vanguard Energy ETF (VDE) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR Fund (XLE) tracks Energy Select Sector Index. Vanguard Energy ETF has $3.44 B in assets, Energy Select Sector SPDR Fund has $12.15 B. VDE has an expense ratio of 0.10% and XLE charges 0.13%.
The Fidelity MSCI Energy Index ETF (FENY) was trading at $17.14 per share on Friday afternoon, up $0.14 (+0.82%). Year-to-date, FENY has declined -13.98%, versus a 10.13% rise in the benchmark S&P 500 index during the same period.
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