XLE vs. VHT: What’s The Difference?

The Energy Select Sector SPDR Fund (XLE) and the Vanguard Health Care Index Fund ETF Shares (VHT) are both among the Top 100 ETFs. XLE is a SPDR State Street Global Advisors Equity Energy fund and VHT is a Vanguard Health fund. So, what’s the difference between XLE and VHT? And which fund is better?

The expense ratio of XLE is 0.02 percentage points higher than VHT’s (0.12% vs. 0.1%). XLE also has a higher exposure to the energy sector and a higher standard deviation. Overall, XLE has provided lower returns than VHT over the past 11 years.

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

Summary

XLE VHT
Name Energy Select Sector SPDR Fund Vanguard Health Care Index Fund ETF Shares
Category Equity Energy Health
Issuer SPDR State Street Global Advisors Vanguard
AUM 25.55B 17.94B
Avg. Return 1.28% 16.04%
Div. Yield 3.92% 1.15%
Expense Ratio 0.12% 0.1%

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 Vanguard Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.

XLE’s dividend yield is 2.77% higher than that of VHT (3.92% vs. 1.15%). Also, XLE yielded on average 14.76% less per year over the past decade (1.28% vs. 16.04%). The expense ratio of XLE is 0.02 percentage points higher than VHT’s (0.12% vs. 0.1%).

Fund Composition

Industry Exposure

XLE vs. VHT - Industry Exposure

XLE VHT
Technology 0.0% 0.05%
Industrials 0.0% 0.05%
Energy 100.0% 0.0%
Communication Services 0.0% 0.0%
Utilities 0.0% 0.0%
Healthcare 0.0% 99.57%
Consumer Defensive 0.0% 0.0%
Real Estate 0.0% 0.0%
Financial Services 0.0% 0.02%
Consumer Cyclical 0.0% 0.0%
Basic Materials 0.0% 0.31%

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 Vanguard Health Care Index Fund ETF Shares (VHT) has the most exposure to the Healthcare sector at 99.57%. This is followed by Basic Materials and Technology at 0.31% and 0.05% respectively. Real Estate (0.0%), Consumer Defensive (0.0%), and Utilities (0.0%) only make up 0.00% of the fund’s total assets.

VHT’s mid-section with moderate exposure is comprised of Communication Services, Energy, Financial Services, Industrials, and Technology stocks at 0.0%, 0.0%, 0.02%, 0.05%, and 0.05%.

XLE is 100.00% more exposed to the Energy sector than VHT (100.0% vs 0.0%). XLE’s exposure to Technology and Industrials stocks is 0.05% lower and 0.05% lower respectively (0.0% vs. 0.05% and 0.0% vs. 0.05%). In total, Consumer Cyclical, Financial Services, and Real Estate also make up 0.02% less of the fund’s holdings compared to VHT (0.00% vs. 0.02%).

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%.

VHT - Holdings

VHT Holdings Weight
Johnson & Johnson 7.34%
UnitedHealth Group Inc 6.44%
Pfizer Inc 3.7%
Abbott Laboratories 3.48%
Thermo Fisher Scientific Inc 3.37%
AbbVie Inc 3.37%
Merck & Co Inc 3.33%
Eli Lilly and Co 3.17%
Danaher Corp 2.91%
Medtronic PLC 2.83%

VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.

AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.

Risk Analysis

XLE VHT
Mean Return 0.32 1.33
R-squared 61.84 59.86
Std. Deviation 27.52 13.58
Alpha -11.98 7.99
Beta 1.54 0.75
Sharpe Ratio 0.12 1.13
Treynor Ratio -0.4 20.74

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

The Vanguard Health Care Index Fund ETF Shares (VHT) has a Beta of 0.75 with a R-squared of 59.86 and a Treynor Ratio of 20.74. Its Sharpe Ratio is 1.13 while VHT’s Mean Return is 1.33. Furthermore, the fund has a Standard Deviation of 13.58 and a Alpha of 7.99.

XLE’s Mean Return is 1.01 points lower than that of VHT and its R-squared is 1.98 points higher. With a Standard Deviation of 27.52, XLE is slightly more volatile than VHT. The Alpha and Beta of XLE are 19.97 points lower and 0.79 points higher than VHT’s Alpha and Beta.

Performance

Annual Returns

XLE vs. VHT - Annual Returns

Year XLE VHT
2020 -32.56% 18.21%
2019 11.87% 21.97%
2018 -18.1% 5.55%
2017 -1.01% 23.34%
2016 27.95% -3.33%
2015 -21.47% 7.22%
2014 -8.61% 25.38%
2013 26.16% 42.67%
2012 5.17% 19.1%
2011 2.98% 10.57%
2010 21.7% 5.75%

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 VHT, returning 42.67% on an annual basis. The poorest year for VHT in the last ten years was 2016, with a yield of -3.33%. Most years the Vanguard Health Care Index Fund ETF Shares has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 10.57%, 18.21%, and 19.1% respectively.

Portfolio Growth

XLE vs. VHT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLE $10,000 $9,339 1.28%
VHT $10,000 $48,464 16.04%

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 VHT, the end total would have been $48,464. This equates to a $38,464 profit over 11 years and a compound annual growth rate (CAGR) of 16.04%.

XLE’s CAGR is 14.76 percentage points lower than that of VHT and as a result, would have yielded $39,125 less on a $10,000 investment. Thus, XLE performed worse than VHT by 14.76% annually.


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