Best Energy ETFs for Q1 2022

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Energy exchange-traded funds (ETFs) invest primarily in stocks of natural gas, oil, and alternative energy companies. The securities within an energy ETF’s portfolio include major companies such as Enbridge Inc. (ENB), as well as smaller, fast-growing companies in the sector such as SunPower Corp. (SPWR).

Because energy ETFs cover a wide variety of businesses, regions, and risk profiles, they offer something for nearly every investor. The ETF approach provides diversification across the industry, allowing investors to gain exposure without taking on the level of risk inherent in investing in a specific energy company. Many energy companies tied to electric vehicles, solar energy, and wind energy may see rising sales and earnings if the Biden administration succeeds in implementing its climate and energy initiatives.

After plunging in spring of 2020, crude oil futures have more than doubled on the New York Mercantile Exchange (NYM) while natural gas futures have jumped more than 65% as of Nov. 2.

Oil prices’ outsized gains have been fueled both by a recovering global economy and by oil demand that’s outpacing supply. The benchmark Bloomberg¬†Brent Crude Subindex has a total return of 131.8% and the Bloomberg Natural Gas Subindex has a total return of 41.1% over the past year, as of Oct. 29, 2021.

Key Takeaways

  • The energy sector has dramatically outperformed the broader market over the past year.
  • The ETFs with the best one-year trailing total return are FCG, PXE, and PXI.
  • The top holdings of these ETFs are ConocoPhillips, Coterra Energy Inc., and Ovintiv Inc., respectively.

There are 44 energy ETFs that trade in the U.S., excluding inverse and leveraged ETFs, as well as funds with less than $50 million in assets under management (AUM). The energy sector, as measured by the S&P 500 Energy Sector Index, has dramatically outperformed the broader market with a total return of 112.0% over the past 12 months compared to the S&P 500’s total return of 41.2% as of Oct. 29, 2021.

The Infrastructure Investment and Jobs Act of 2021 will provide support for parts of the energy industry. In particular, funds will be allocated to electric grid infrastructure and power lines, as well as expanding clean energy.

The S&P 500 Energy Sector Index is not a perfect benchmark reflecting the universe of energy stocks because many clean energy stocks are classified in other sectors. The index, nonetheless, captures most of the ETFs in the energy sector. The best energy ETF, based on performance over the past year, is the First Trust Natural Gas ETF (FCG). We examine the top three energy ETFs below. All numbers below are also as of Oct. 29, 2021.

  • Performance Over One-Year: 208.2%
  • Expense Ratio: 0.60%
  • Annual Dividend Yield: 1.58%
  • 3-Month Average Daily Volume: 1,615,126
  • Assets Under Management: $512.3 million
  • Inception Date: May 8, 2007
  • Issuer: First Trust

FCG tracks the ISE-Revere Natural Gas Index, which is comprised of companies that generate a significant amount of their revenue from the exploration for and production of natural gas. The ETF provides investors with exposure to the natural gas industry, which helps to provide an important fuel source for residential, industrial, and commercial uses. Investors may find the fund useful as a way to benefit from an increasing demand for natural gas.

FCG follows a blended strategy, investing in a mix of growth and value stocks with various market capitalizations. Its top three holdings include ConocoPhillips (COP), a multinational oil and gas exploration and production company; EOG Resources Inc. (EOG), an oil and gas exploration and production company; and Occidental Petroleum Corp. (OXY), an oil and gas exploration and production company that also manufactures chemicals.

  • Performance Over One-Year: 191.3%
  • Expense Ratio: 0.63%
  • Annual Dividend Yield: 1.69%
  • 3-Month Average Daily Volume: 103,412
  • Assets Under Management: $143.6 million
  • Inception Date: Oct. 26, 2005
  • Issuer: Invesco


PXE is a multi-cap blended fund that tracks the Dynamic Energy Exploration & Production Intellidex Index. The index is composed of 30 U.S. companies involved in the exploration and production of natural resources used to produce energy, selected based on factors including price momentum, earnings momentum, quality, management action, and value.

The fund’s portfolio also includes petroleum refineries that process crude oil into finished products, such as gasoline and automotive lubricants, and companies involved in gathering and processing natural gas, and manufacturing natural gas liquid. Together, small-cap and mid-cap value stocks make up more than 75% of the fund’s portfolio. The top holdings include Coterra Energy Inc. (CTRA), a diversified hydrocarbon exploration company; Occidental Petroleum; and EOG Resources

  • Performance Over One-Year: 173.9%
  • Expense Ratio: 0.60%
  • Annual Dividend Yield: 0.36%
  • 3-Month Average Daily Volume: 119,286
  • Assets Under Management: $96.5 million
  • Inception Date: Oct. 12, 2006
  • Issuer: Invesco

PXI is a multi-cap blended fund that targets the Dorsey Wright Energy Technical Leaders Index. The index is comprised of 30 securities from the NASDAQ US Benchmark Index which show relative strength versus competitors within the industry or sector. More than 90% of PXI’s holdings are within the oil, gas, and consumable fuels industries, although the fund also holds companies in energy equipment and services, semiconductors, and metals and mining. Just under half of holdings represent small-cap value stocks.

The top holdings of PXI include Ovintiv Inc. (OVV), a hydrocarbon exploration and production company; Cheniere Energy Inc. (LNG), a liquefied natural gas company; and Range Resources Corp. (RRC), a petroleum and natural gas exploration and production company.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Though we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.



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