The Energy Select Sector SPDR Fund (XLE) and the iShares MSCI USA Quality Factor ETF (QUAL) are both among the Top 100 ETFs. XLE is a SPDR State Street Global Advisors Equity Energy fund and QUAL is a iShares Large Blend fund. So, what’s the difference between XLE and QUAL? And which fund is better?
The expense ratio of XLE is 0.03 percentage points lower than QUAL’s (0.12% vs. 0.15%). XLE also has a higher exposure to the energy sector and a higher standard deviation. Overall, XLE has provided lower returns than QUAL over the past 7 years.
In this article, we’ll compare XLE vs. QUAL. We’ll look at risk metrics and holdings, as well as at their performance and annual returns. Moreover, I’ll also discuss XLE’s and QUAL’s fund composition, industry exposure, and portfolio growth and examine how these affect their overall returns.
|Name||Energy Select Sector SPDR Fund||iShares MSCI USA Quality Factor ETF|
|Category||Equity Energy||Large Blend|
|Issuer||SPDR State Street Global Advisors||iShares|
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 MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.
XLE’s dividend yield is 2.63% higher than that of QUAL (3.92% vs. 1.29%). Also, XLE yielded on average 12.14% less per year over the past decade (1.28% vs. 13.42%). The expense ratio of XLE is 0.03 percentage points lower than QUAL’s (0.12% vs. 0.15%).
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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 iShares MSCI USA Quality Factor ETF (QUAL) has the most exposure to the Technology sector at 22.52%. This is followed by Financial Services and Healthcare at 15.87% and 13.22% respectively. Basic Materials (2.35%), Utilities (2.41%), and Real Estate (2.72%) only make up 7.48% of the fund’s total assets.
QUAL’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Consumer Cyclical, Communication Services, and Healthcare stocks at 8.57%, 9.22%, 9.43%, 11.44%, and 13.22%.
XLE is 97.76% more exposed to the Energy sector than QUAL (100.0% vs 2.24%). XLE’s exposure to Technology and Industrials stocks is 22.52% lower and 9.22% lower respectively (0.0% vs. 22.52% and 0.0% vs. 9.22%). In total, Consumer Cyclical, Financial Services, and Real Estate also make up 28.02% less of the fund’s holdings compared to QUAL (0.00% vs. 28.02%).
|Exxon Mobil Corp||23.7%|
|EOG Resources Inc||4.46%|
|Marathon Petroleum Corp||4.17%|
|Pioneer Natural Resources Co||4.08%|
|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%.
|Facebook Inc Class A||4.77%|
|Nike Inc Class B||4.05%|
|Johnson & Johnson||2.99%|
|Mastercard Inc Class A||2.72%|
|Alphabet Inc Class A||2.49%|
QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.
BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.
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The Energy Select Sector SPDR Fund (XLE) has a Treynor Ratio of -0.4 with a R-squared of 61.84 and a Beta of 1.54. Its Standard Deviation is 27.52 while XLE’s Sharpe Ratio is 0.12. Furthermore, the fund has a Alpha of -11.98 and a Mean Return of 0.32.
The iShares MSCI USA Quality Factor ETF (QUAL) has a R-squared of 0 with a Beta of 0 and a Standard Deviation of 0. Its Mean Return is 0 while QUAL’s Alpha is 0. Furthermore, the fund has a Treynor Ratio of 0 and a Sharpe Ratio of 0.
XLE’s Mean Return is 0.32 points higher than that of QUAL and its R-squared is 61.84 points higher. With a Standard Deviation of 27.52, XLE is slightly more volatile than QUAL. The Alpha and Beta of XLE are 11.98 points lower and 1.54 points higher than QUAL’s Alpha and Beta.
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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 QUAL, returning 34.14% on an annual basis. The poorest year for QUAL in the last ten years was 2018, with a yield of -5.77%. Most years the iShares MSCI USA Quality Factor ETF has given investors modest returns, such as in 2010, 2015, and 2016, when gains were 0.0%, 5.56%, and 9.18% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in XLE would have resulted in a final balance of $5,616. This is a profit of $-4,384 over 7 years and amounts to a compound annual growth rate (CAGR) of 1.28%.
With a $10,000 investment in QUAL, the end total would have been $23,251. This equates to a $13,251 profit over 7 years and a compound annual growth rate (CAGR) of 13.42%.
XLE’s CAGR is 12.14 percentage points lower than that of QUAL and as a result, would have yielded $17,635 less on a $10,000 investment. Thus, XLE performed worse than QUAL by 12.14% annually.
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