XLK vs. XLE: What’s The Difference?

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

XLK and XLE have the same expense ratio: 0.12%. XLK also has a higher exposure to the technology sector and a lower standard deviation. Overall, XLK has provided higher returns than XLE over the past ten years.

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

Summary

XLK XLE
Name Technology Select Sector SPDR Fund Energy Select Sector SPDR Fund
Category Technology Equity Energy
Issuer SPDR State Street Global Advisors SPDR State Street Global Advisors
AUM 42.3B 25.55B
Avg. Return 20.02% 1.28%
Div. Yield 0.73% 3.92%
Expense Ratio 0.12% 0.12%

The Technology Select Sector SPDR Fund (XLK) is a Technology fund that is issued by SPDR State Street Global Advisors. It currently has 42.3B total assets under management and has yielded an average annual return of 20.02% over the past 10 years. The fund has a dividend yield of 0.73% with an expense ratio of 0.12%.

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%.

XLK’s dividend yield is 3.19% lower than that of XLE (0.73% vs. 3.92%). Also, XLK yielded on average 18.74% more per year over the past decade (20.02% vs. 1.28%). XLK and XLE have the same expense ratio: 0.12%.

Fund Composition

Industry Exposure

XLK vs. XLE - Industry Exposure

XLK XLE
Technology 87.54% 0.0%
Industrials 1.75% 0.0%
Energy 0.0% 100.0%
Communication Services 0.0% 0.0%
Utilities 0.0% 0.0%
Healthcare 0.0% 0.0%
Consumer Defensive 0.0% 0.0%
Real Estate 0.0% 0.0%
Financial Services 10.71% 0.0%
Consumer Cyclical 0.0% 0.0%
Basic Materials 0.0% 0.0%

The Technology Select Sector SPDR Fund (XLK) has the most exposure to the Technology sector at 87.54%. This is followed by Financial Services and Industrials at 10.71% and 1.75% respectively. Consumer Cyclical (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

XLK’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 1.75%.

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%.

XLK is 87.54% more exposed to the Technology sector than XLE (87.54% vs 0.0%). XLK’s exposure to Financial Services and Industrials stocks is 10.71% higher and 1.75% higher respectively (10.71% vs. 0.0% and 1.75% vs. 0.0%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 0.00% less of the fund’s holdings compared to XLE (0.00% vs. 0.00%).

Holdings

XLK - Holdings

XLK Holdings Weight
Apple Inc 21.45%
Microsoft Corp 20.37%
NVIDIA Corp 4.98%
Visa Inc Class A 3.95%
PayPal Holdings Inc 3.42%
Mastercard Inc A 3.19%
Adobe Inc 2.8%
Salesforce.com Inc 2.26%
Intel Corp 2.26%
Cisco Systems Inc 2.23%

XLK’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 21.45%, 20.37%, 4.98%, 3.95%, and 3.42%.

Mastercard Inc A (3.19%), Adobe Inc (2.8%), and Salesforce.com Inc (2.26%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the XLK’s holdings at 2.26% and 2.23%.

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%.

Risk Analysis

XLK XLE
Mean Return 1.7 0.32
R-squared 73.56 61.84
Std. Deviation 15.58 27.52
Alpha 10.43 -11.98
Beta 0.95 1.54
Sharpe Ratio 1.27 0.12
Treynor Ratio 21.44 -0.4

The Technology Select Sector SPDR Fund (XLK) has a Beta of 0.95 with a R-squared of 73.56 and a Sharpe Ratio of 1.27. Its Alpha is 10.43 while XLK’s Mean Return is 1.7. Furthermore, the fund has a Treynor Ratio of 21.44 and a Standard Deviation of 15.58.

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

XLK’s Mean Return is 1.38 points higher than that of XLE and its R-squared is 11.72 points higher. With a Standard Deviation of 15.58, XLK is slightly less volatile than XLE. The Alpha and Beta of XLK are 22.41 points higher and 0.59 points lower than XLE’s Alpha and Beta.

Performance

Annual Returns

XLK vs. XLE - Annual Returns

Year XLK XLE
2020 43.67% -32.56%
2019 49.97% 11.87%
2018 -1.56% -18.1%
2017 34.27% -1.01%
2016 14.81% 27.95%
2015 5.62% -21.47%
2014 17.75% -8.61%
2013 25.98% 26.16%
2012 15.47% 5.17%
2011 2.69% 2.98%
2010 11.6% 21.7%

XLK had its best year in 2019 with an annual return of 49.97%. XLK’s worst year over the past decade yielded -1.56% and occurred in 2018. In most years the Technology Select Sector SPDR Fund provided moderate returns such as in 2016, 2012, and 2014 where annual returns amounted to 14.81%, 15.47%, and 17.75% respectively.

The year 2016 was the strongest year for XLE, returning 27.95% on an annual basis. The poorest year for XLE in the last ten years was 2020, with a yield of -32.56%. Most years the Energy Select Sector SPDR Fund has given investors modest returns, such as in 2017, 2011, and 2012, when gains were -1.01%, 2.98%, and 5.17% respectively.

Portfolio Growth

XLK vs. XLE - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLK $10,000 $67,790 20.02%
XLE $10,000 $9,339 1.28%

A $10,000 investment in XLK would have resulted in a final balance of $67,790. This is a profit of $57,790 over 11 years and amounts to a compound annual growth rate (CAGR) of 20.02%.

With a $10,000 investment in XLE, the end total would have been $9,339. This equates to a $-661 profit over 11 years and a compound annual growth rate (CAGR) of 1.28%.

XLK’s CAGR is 18.74 percentage points higher than that of XLE and as a result, would have yielded $58,451 more on a $10,000 investment. Thus, XLK outperformed XLE by 18.74% annually.


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