Does Your Commodity ETF Own Oil Futures Or Oil Stocks?

“The volatility of the last two years has investors searching for investment vehicles that can help diversify their portfolios from the wild swings of the stock market. The old-school method often involves buying stocks in different asset classes (small, large, etc.), but even that would not have protected your portfolio in the treacherous recession of 2008,” Matthew McCall Reports From Investopedia.

McCall goes on to say, “An asset class that has attracted great fanfare the last decade has been the commodities. This explosion of popularity has to do with the performance of many of the commodities as well as the expansion of commodity ETFs. Until a few years ago, it was not easy for the average individual investor to invest in gold bullion or sugar futures. Today that can be accomplished using the same process as buying a stock online.”

“Delving further into commodity ETFs it is imperative to first explain the difference between ETFs that track commodity stocks and those that track the underlying commodity itself. The SPDRs Energy ETF (NYSE:XLE) is composed of a basket of stocks that do business in the energy sector. Many of the stocks will benefit from an increase in the rise of the price of oil, but there are other factors that affect each individual company. The United State Oil ETF (USO) actually own oil futures contracts that will move based on the price of oil. From 2007 through 2009, USO lost 24% as XLE only fell by 3%; a big difference considering the close connection the two ETFs have with each other. Investors must be aware of what an ETF invests in, stocks or the underlying commodity, before considering buying,” McCall Reports.

See more details to the story: HERE

We put together some details on the two ETFs below:

The Energy Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Energy Select Sector Index (ticker: IXE). Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.

Fund Name: Energy Select      
Ticker Symbol: XLE      
Holdings: As Of 03/22/2010      
Name Weight Ticker Sector Shares Held
Exxon Mobil Corp 17.89 (XOM) Energy 15637097
Chevron Corp New 12.8 (CVX) Energy 10063581
Schlumberger Ltd 6.65 (SLB) Energy 6128009
Occidental Pete Corp Del 4.91 (OXY) Energy 3477478
Conocophillips 4.8 (COP) Energy 5391093
Anadarko Pete Corp 3.39 (APC) Energy 2813785
Apache Corp 3.3 (APA) Energy 1903720
Halliburton Co 2.78 (HAL) Energy 5317023
Devon Energy Corp New 2.77 (DVN) Energy 2529985
Xto Energy Inc 2.7 (XTO) Energy 3342865
Eog Res Inc 2.36 (EOG) Energy 1511151
Marathon Oil Corp 2.21 (MRO) Energy 4078249
National Oilwell Varco Inc 1.88 (NOV) Energy 2605480
Hess Corp 1.86 (HES) Energy 1776289
Chesapeake Energy Corp 1.69 (CHK) Energy 4256226
Baker Hughes Inc 1.65 (BHI) Energy 2027616
Spectra Energy Corp 1.62 (SE) Energy 4264032
Williams Cos Inc Del 1.55 (WMB) Energy 4040525
Peabody Energy Corp 1.53 (BTU) Energy 1921967
Southwestern Energy Co 1.48 (SWN) Energy 2171006
Smith Intl Inc 1.47 (SII) Energy 2014818
Noble Energy Inc 1.44 (NBL) Energy 1166071
Cameron International Corp 1.39 (CAM) Energy 1923096
Valero Energy Corp New 1.34 (VLO) Energy 3869587
Murphy Oil Corp 1.2 (MUR) Energy 1272783
Massey Energy Corp 1.19 (MEE) Energy 1369976
Pioneer Nat Res Co 1.15 (PXD) Energy 1284709
Fmc Technologies Inc 1.12 (FTI) Energy 1076019
Consol Energy Inc 1.09 (CNX) Energy 1422682
Denbury Res Inc 1.03 (DNR) Energy 3905770
Bj Svcs Co 1.03 (BJS) Energy 2784192
El Paso Corp 1.01 (EP) Energy 5431914
Range Res Corp 1 (RRC) Energy 1225337
Nabors Industries Ltd 0.89 (NBR) Energy 2570959
Diamond Offshore Drilling I 0.81 (DO) Energy 560101
Cabot Oil & Gas Corp 0.71 (COG) Energy 1102963
Sunoco Inc 0.7 (SUN) Energy 1366341
Rowan Cos Inc 0.68 (RDC) Energy 1510935
Tesoro Corp 0.51 (TSO) Energy 2169023
Helmerich & Payne Inc 0.34 (HP) Energy 518593
State Str Instl Liquid Resvs 0.12 85749P9A Unassigned 7308374
U.S. Dollar -0.06 CASH_USD Unassigned -3679201

Chart for Energy Select Sector SPDR (XLE)

The United States Oil Fund, LP (“USO”) is a domestic exchange traded security designed to track the movements of light, sweet crude oil (“West Texas Intermediate”). USO issues units that may be purchased and sold on the NYSE Arca. The investment objective of USO is for the changes in percentage terms of its units’ net asset value (“NAV”) to reflect the changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the changes in the price of the futures contract for light, sweet crude oil traded on the New York Mercantile Exchange (the “NYMEX”), less USO’s expenses.

Chart for United States Oil (USO)

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