XLE vs. SCHA: What’s The Difference?

The Energy Select Sector SPDR Fund (XLE) and the Schwab U.S. Small-Cap ETF (SCHA) are both among the Top 100 ETFs. XLE is a SPDR State Street Global Advisors Equity Energy fund and SCHA is a Schwab ETFs Small Blend fund. So, what’s the difference between XLE and SCHA? And which fund is better?

The expense ratio of XLE is 0.08 percentage points higher than SCHA’s (0.12% vs. 0.04%). XLE also has a higher exposure to the energy sector and a higher standard deviation. Overall, XLE has provided lower returns than SCHA over the past 10 years.

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

Summary

XLE SCHA
Name Energy Select Sector SPDR Fund Schwab U.S. Small-Cap ETF
Category Equity Energy Small Blend
Issuer SPDR State Street Global Advisors Schwab ETFs
AUM 25.55B 16.51B
Avg. Return 1.28% 12.62%
Div. Yield 3.92% 0.98%
Expense Ratio 0.12% 0.04%

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 Schwab U.S. Small-Cap ETF (SCHA) is a Small Blend fund that is issued by Schwab ETFs. It currently has 16.51B total assets under management and has yielded an average annual return of 12.62% over the past 10 years. The fund has a dividend yield of 0.98% with an expense ratio of 0.04%.

XLE’s dividend yield is 2.94% higher than that of SCHA (3.92% vs. 0.98%). Also, XLE yielded on average 11.34% less per year over the past decade (1.28% vs. 12.62%). The expense ratio of XLE is 0.08 percentage points higher than SCHA’s (0.12% vs. 0.04%).

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Fund Composition

Industry Exposure

XLE vs. SCHA - Industry Exposure

XLE SCHA
Technology 0.0% 14.91%
Industrials 0.0% 15.37%
Energy 100.0% 3.35%
Communication Services 0.0% 3.5%
Utilities 0.0% 1.83%
Healthcare 0.0% 16.5%
Consumer Defensive 0.0% 3.75%
Real Estate 0.0% 7.83%
Financial Services 0.0% 14.49%
Consumer Cyclical 0.0% 14.48%
Basic Materials 0.0% 3.98%

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 Schwab U.S. Small-Cap ETF (SCHA) has the most exposure to the Healthcare sector at 16.5%. This is followed by Industrials and Technology at 15.37% and 14.91% respectively. Energy (3.35%), Communication Services (3.5%), and Consumer Defensive (3.75%) only make up 10.60% of the fund’s total assets.

SCHA’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.98%, 7.83%, 14.48%, 14.49%, and 14.91%.

XLE is 96.65% more exposed to the Energy sector than SCHA (100.0% vs 3.35%). XLE’s exposure to Technology and Industrials stocks is 14.91% lower and 15.37% lower respectively (0.0% vs. 14.91% and 0.0% vs. 15.37%). In total, Consumer Cyclical, Financial Services, and Real Estate also make up 36.80% less of the fund’s holdings compared to SCHA (0.00% vs. 36.80%).

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%.

SCHA - Holdings

SCHA Holdings Weight
AMC Entertainment Holdings Inc Class A 0.67%
Caesars Entertainment Inc 0.51%
Cloudflare Inc 0.48%
NovoCure Ltd 0.45%
Plug Power Inc 0.41%
10x Genomics Inc Ordinary Shares – Class A 0.34%
GameStop Corp Class A 0.28%
RH 0.27%
Penn National Gaming Inc 0.27%
Axon Enterprise Inc 0.27%

SCHA’s Top Holdings are AMC Entertainment Holdings Inc Class A, Caesars Entertainment Inc, Cloudflare Inc, NovoCure Ltd, and Plug Power Inc at 0.67%, 0.51%, 0.48%, 0.45%, and 0.41%.

10x Genomics Inc Ordinary Shares – Class A (0.34%), GameStop Corp Class A (0.28%), and RH (0.27%) have a slightly smaller but still significant weight. Penn National Gaming Inc and Axon Enterprise Inc are also represented in the SCHA’s holdings at 0.27% and 0.27%.

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Risk Analysis

XLE SCHA
Mean Return 0.32 1.14
R-squared 61.84 82.26
Std. Deviation 27.52 18.68
Alpha -11.98 -4.65
Beta 1.54 1.25
Sharpe Ratio 0.12 0.7
Treynor Ratio -0.4 9.62

The Energy Select Sector SPDR Fund (XLE) has a Mean Return of 0.32 with a Treynor Ratio of -0.4 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 R-squared of 61.84 and a Alpha of -11.98.

The Schwab U.S. Small-Cap ETF (SCHA) has a Beta of 1.25 with a Standard Deviation of 18.68 and a R-squared of 82.26. Its Treynor Ratio is 9.62 while SCHA’s Sharpe Ratio is 0.7. Furthermore, the fund has a Mean Return of 1.14 and a Alpha of -4.65.

XLE’s Mean Return is 0.82 points lower than that of SCHA and its R-squared is 20.42 points lower. With a Standard Deviation of 27.52, XLE is slightly more volatile than SCHA. The Alpha and Beta of XLE are 7.33 points lower and 0.29 points higher than SCHA’s Alpha and Beta.

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Performance

Annual Returns

XLE vs. SCHA - Annual Returns

Year XLE SCHA
2020 -32.56% 19.35%
2019 11.87% 26.54%
2018 -18.1% -11.75%
2017 -1.01% 15.04%
2016 27.95% 19.88%
2015 -21.47% -4.24%
2014 -8.61% 6.53%
2013 26.16% 39.59%
2012 5.17% 18.24%
2011 2.98% -2.95%
2010 21.7% 28.31%

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 SCHA, returning 39.59% on an annual basis. The poorest year for SCHA in the last ten years was 2018, with a yield of -11.75%. Most years the Schwab U.S. Small-Cap ETF has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 15.04%, 18.24%, and 19.35% respectively.

Portfolio Growth

XLE vs. SCHA - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLE $10,000 $7,674 1.28%
SCHA $10,000 $30,035 12.62%

A $10,000 investment in XLE would have resulted in a final balance of $7,674. This is a profit of $-2,326 over 10 years and amounts to a compound annual growth rate (CAGR) of 1.28%.

With a $10,000 investment in SCHA, the end total would have been $30,035. This equates to a $20,035 profit over 10 years and a compound annual growth rate (CAGR) of 12.62%.

XLE’s CAGR is 11.34 percentage points lower than that of SCHA and as a result, would have yielded $22,361 less on a $10,000 investment. Thus, XLE performed worse than SCHA by 11.34% annually.


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