XLE vs. MBB: What’s The Difference?

The Energy Select Sector SPDR Fund (XLE) and the iShares MBS ETF (MBB) are both among the Top 100 ETFs. XLE is a SPDR State Street Global Advisors Equity Energy fund and MBB is a iShares Intermediate Government fund. So, what’s the difference between XLE and MBB? And which fund is better?

The expense ratio of XLE is 0.06 percentage points higher than MBB’s (0.12% vs. 0.06%). XLE also has a high exposure to the energy sector while MBB is mostly comprised of AAA bonds. Overall, XLE has provided lower returns than MBB over the past 11 years.

In this article, we’ll compare XLE vs. MBB. We’ll look at industry exposure and portfolio growth, as well as at their fund composition and performance. Moreover, I’ll also discuss XLE’s and MBB’s annual returns, risk metrics, and holdings and examine how these affect their overall returns.

Summary

XLE MBB
Name Energy Select Sector SPDR Fund iShares MBS ETF
Category Equity Energy Intermediate Government
Issuer SPDR State Street Global Advisors iShares
AUM 25.55B 25.69B
Avg. Return 1.28% 3.08%
Div. Yield 3.92% 1.88%
Expense Ratio 0.12% 0.06%

The Energy Select Sector SPDR Fund (XLE) is a Equity Energy fund that is issued by SPDR State Street Global Advisors. It currently has 25.55B total assets under management and has yielded an average annual return of 1.28% over the past 10 years. The fund has a dividend yield of 3.92% with an expense ratio of 0.12%.

The iShares MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.06%.

XLE’s dividend yield is 2.04% higher than that of MBB (3.92% vs. 1.88%). Also, XLE yielded on average 1.80% less per year over the past decade (1.28% vs. 3.08%). The expense ratio of XLE is 0.06 percentage points higher than MBB’s (0.12% vs. 0.06%).

Fund Composition

Holdings

XLE - Holdings

XLE Holdings Weight
Exxon Mobil Corp 23.7%
Chevron Corp 20.03%
ConocoPhillips 4.64%
EOG Resources Inc 4.46%
Schlumberger Ltd 4.43%
Marathon Petroleum Corp 4.17%
Pioneer Natural Resources Co 4.08%
Phillips 66 4.07%
Kinder Morgan Inc Class P 3.85%
Williams Companies Inc 3.5%

XLE’s Top Holdings are Exxon Mobil Corp, Chevron Corp, ConocoPhillips, EOG Resources Inc, and Schlumberger Ltd at 23.7%, 20.03%, 4.64%, 4.46%, and 4.43%.

Marathon Petroleum Corp (4.17%), Pioneer Natural Resources Co (4.08%), and Phillips 66 (4.07%) have a slightly smaller but still significant weight. Kinder Morgan Inc Class P and Williams Companies Inc are also represented in the XLE’s holdings at 3.85% and 3.5%.

MBB - Holdings

MBB Bond Sectors Weight
AAA 99.51%
Others 0.49%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

Risk Analysis

XLE MBB
Mean Return 0.32 0.2
R-squared 61.84 74.38
Std. Deviation 27.52 2.12
Alpha -11.98 0.14
Beta 1.54 0.6
Sharpe Ratio 0.12 0.87
Treynor Ratio -0.4 3.02

The Energy Select Sector SPDR Fund (XLE) has a Standard Deviation of 27.52 with a Sharpe Ratio of 0.12 and a Alpha of -11.98. Its Beta is 1.54 while XLE’s Treynor Ratio is -0.4. Furthermore, the fund has a Mean Return of 0.32 and a R-squared of 61.84.

The iShares MBS ETF (MBB) has a Treynor Ratio of 3.02 with a Sharpe Ratio of 0.87 and a Alpha of 0.14. Its Beta is 0.6 while MBB’s Standard Deviation is 2.12. Furthermore, the fund has a Mean Return of 0.2 and a R-squared of 74.38.

XLE’s Mean Return is 0.12 points higher than that of MBB and its R-squared is 12.54 points lower. With a Standard Deviation of 27.52, XLE is slightly more volatile than MBB. The Alpha and Beta of XLE are 12.12 points lower and 0.94 points higher than MBB’s Alpha and Beta.

Performance

Annual Returns

XLE vs. MBB - Annual Returns

Year XLE MBB
2020 -32.56% 4.03%
2019 11.87% 6.27%
2018 -18.1% 0.81%
2017 -1.01% 2.37%
2016 27.95% 1.28%
2015 -21.47% 1.28%
2014 -8.61% 6.16%
2013 26.16% -1.92%
2012 5.17% 2.23%
2011 2.98% 5.88%
2010 21.7% 5.44%

XLE had its best year in 2016 with an annual return of 27.95%. XLE’s worst year over the past decade yielded -32.56% and occurred in 2020. In most years the Energy Select Sector SPDR Fund provided moderate returns such as in 2017, 2011, and 2012 where annual returns amounted to -1.01%, 2.98%, and 5.17% respectively.

The year 2019 was the strongest year for MBB, returning 6.27% on an annual basis. The poorest year for MBB in the last ten years was 2013, with a yield of -1.92%. Most years the iShares MBS ETF has given investors modest returns, such as in 2012, 2017, and 2020, when gains were 2.23%, 2.37%, and 4.03% respectively.

Portfolio Growth

XLE vs. MBB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLE $10,000 $9,339 1.28%
MBB $10,000 $13,906 3.08%

A $10,000 investment in XLE would have resulted in a final balance of $9,339. This is a profit of $-661 over 11 years and amounts to a compound annual growth rate (CAGR) of 1.28%.

With a $10,000 investment in MBB, the end total would have been $13,906. This equates to a $3,906 profit over 11 years and a compound annual growth rate (CAGR) of 3.08%.

XLE’s CAGR is 1.80 percentage points lower than that of MBB and as a result, would have yielded $4,567 less on a $10,000 investment. Thus, XLE performed worse than MBB by 1.80% annually.


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