XLE vs. MDY: What’s The Difference?

The Energy Select Sector SPDR Fund (XLE) and the SPDR S&P MIDCAP 400 ETF Trust (MDY) are both among the Top 100 ETFs. XLE is a SPDR State Street Global Advisors Equity Energy fund and MDY is a SPDR State Street Global Advisors Mid-Cap Blend fund. So, what’s the difference between XLE and MDY? And which fund is better?

The expense ratio of XLE is 0.11 percentage points lower than MDY’s (0.12% vs. 0.23%). XLE also has a higher exposure to the energy sector and a higher standard deviation. Overall, XLE has provided lower returns than MDY over the past 11 years.

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

Summary

XLE MDY
Name Energy Select Sector SPDR Fund SPDR S&P MIDCAP 400 ETF Trust
Category Equity Energy Mid-Cap Blend
Issuer SPDR State Street Global Advisors SPDR State Street Global Advisors
AUM 25.55B 21.31B
Avg. Return 1.28% 13.29%
Div. Yield 3.92% 0.94%
Expense Ratio 0.12% 0.23%

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 SPDR S&P MIDCAP 400 ETF Trust (MDY) is a Mid-Cap Blend fund that is issued by SPDR State Street Global Advisors. It currently has 21.31B total assets under management and has yielded an average annual return of 13.29% over the past 10 years. The fund has a dividend yield of 0.94% with an expense ratio of 0.23%.

XLE’s dividend yield is 2.98% higher than that of MDY (3.92% vs. 0.94%). Also, XLE yielded on average 12.01% less per year over the past decade (1.28% vs. 13.29%). The expense ratio of XLE is 0.11 percentage points lower than MDY’s (0.12% vs. 0.23%).

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Fund Composition

Industry Exposure

XLE vs. MDY - Industry Exposure

XLE MDY
Technology 0.0% 14.74%
Industrials 0.0% 17.88%
Energy 100.0% 2.52%
Communication Services 0.0% 1.63%
Utilities 0.0% 2.84%
Healthcare 0.0% 11.17%
Consumer Defensive 0.0% 4.2%
Real Estate 0.0% 9.66%
Financial Services 0.0% 15.2%
Consumer Cyclical 0.0% 14.89%
Basic Materials 0.0% 5.27%

The Energy Select Sector SPDR Fund (XLE) has the most exposure to the Energy sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

XLE’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

The SPDR S&P MIDCAP 400 ETF Trust (MDY) has the most exposure to the Industrials sector at 17.88%. This is followed by Financial Services and Consumer Cyclical at 15.2% and 14.89% respectively. Energy (2.52%), Utilities (2.84%), and Consumer Defensive (4.2%) only make up 9.56% of the fund’s total assets.

MDY’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Healthcare, Technology, and Consumer Cyclical stocks at 5.27%, 9.66%, 11.17%, 14.74%, and 14.89%.

XLE is 97.48% more exposed to the Energy sector than MDY (100.0% vs 2.52%). XLE’s exposure to Technology and Industrials stocks is 14.74% lower and 17.88% lower respectively (0.0% vs. 14.74% and 0.0% vs. 17.88%). In total, Consumer Cyclical, Financial Services, and Real Estate also make up 39.75% less of the fund’s holdings compared to MDY (0.00% vs. 39.75%).

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%.

MDY - Holdings

MDY Holdings Weight
Bio-Techne Corp 0.75%
Molina Healthcare Inc 0.63%
Cognex Corp 0.63%
Fair Isaac Corp 0.62%
XPO Logistics Inc 0.61%
SolarEdge Technologies Inc 0.61%
Signature Bank 0.6%
Graco Inc 0.55%
Camden Property Trust 0.55%
FactSet Research Systems Inc 0.54%

MDY’s Top Holdings are Bio-Techne Corp, Molina Healthcare Inc, Cognex Corp, Fair Isaac Corp, and XPO Logistics Inc at 0.75%, 0.63%, 0.63%, 0.62%, and 0.61%.

SolarEdge Technologies Inc (0.61%), Signature Bank (0.6%), and Graco Inc (0.55%) have a slightly smaller but still significant weight. Camden Property Trust and FactSet Research Systems Inc are also represented in the MDY’s holdings at 0.55% and 0.54%.

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Risk Analysis

XLE MDY
Mean Return 0.32 1.08
R-squared 61.84 86.66
Std. Deviation 27.52 16.83
Alpha -11.98 -4.1
Beta 1.54 1.15
Sharpe Ratio 0.12 0.73
Treynor Ratio -0.4 9.97

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

The SPDR S&P MIDCAP 400 ETF Trust (MDY) has a R-squared of 86.66 with a Mean Return of 1.08 and a Standard Deviation of 16.83. Its Treynor Ratio is 9.97 while MDY’s Alpha is -4.1. Furthermore, the fund has a Sharpe Ratio of 0.73 and a Beta of 1.15.

XLE’s Mean Return is 0.76 points lower than that of MDY and its R-squared is 24.82 points lower. With a Standard Deviation of 27.52, XLE is slightly more volatile than MDY. The Alpha and Beta of XLE are 7.88 points lower and 0.39 points higher than MDY’s Alpha and Beta.

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Performance

Annual Returns

XLE vs. MDY - Annual Returns

Year XLE MDY
2020 -32.56% 13.51%
2019 11.87% 25.86%
2018 -18.1% -11.28%
2017 -1.01% 15.89%
2016 27.95% 20.33%
2015 -21.47% -2.4%
2014 -8.61% 9.42%
2013 26.16% 33.08%
2012 5.17% 17.58%
2011 2.98% -1.99%
2010 21.7% 26.17%

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 2013 was the strongest year for MDY, returning 33.08% on an annual basis. The poorest year for MDY in the last ten years was 2018, with a yield of -11.28%. Most years the SPDR S&P MIDCAP 400 ETF Trust has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 13.51%, 15.89%, and 17.58% respectively.

Portfolio Growth

XLE vs. MDY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLE $10,000 $9,339 1.28%
MDY $10,000 $36,524 13.29%

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 MDY, the end total would have been $36,524. This equates to a $26,524 profit over 11 years and a compound annual growth rate (CAGR) of 13.29%.

XLE’s CAGR is 12.01 percentage points lower than that of MDY and as a result, would have yielded $27,185 less on a $10,000 investment. Thus, XLE performed worse than MDY by 12.01% annually.


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