S&P Weighs Weighs In On A Pair Of Energy ETFs

So many energy ETFs, so little time, but at least the fine folks at Standard & Poor's Capital IQ are helping investors make a decision between two of the more popular funds tracking the energy patch. In a note published today, S&P Capital IQ took at the Energy Select Sector SPDR

and the Rydex S&P Equal Weight Energy ETF

. With almost $7.4 billion in assets under management, XLE is the giant of the energy ETF universe. By comparison, RYE has just $36.3 million in AUM. XLE's expense ratio is just 0.2% compared to 0.5% for its equal-weight rival. Those might be two reasons to consider XLE over RYE and S&P cites more reasons for its “overweight” rating with positive implications on XLE and its “marketweight” rating with negative implications on RYE. Investing in large-cap energy stocks offers two benefits -- namely income generation and relatively lower volatility, according to S&P Capital IQ Equity Analyst Stewart Glickman, who notes that dividends make up a pretty sizable percentage of total return in large-cap investing over the long term, S&P said in the note. In other words, despite the fact that Exxon Mobil

and Chevron

account for over 32% of XLE's weight, investors would do well to cozy up to these high-quality oil names. Noting that weightings matter not only in terms of strategy, but in terms of performance, S&P highlights the following: “RYE had an average annual gain of 7.7% from inception in November 2006 through November 15, 2011. By contrast, the market cap-weighted XLE had an average annual gain of 10.5% since inception in December 1998.” Breaking things down further, S&P rates nine of XLE's top-10 holdings “strong buy” while saying RYE has only three top-10 holdings with “buy” rankings, and none with “strong buy.'' The largest stock among RYE's top-10 holdings is Occidental Petroluem

, with a weight of less than 2.7%. By comparison, Occidental accounts for 4.75% of XLE's weight. “Bottom line, XLE outperforms RYE in every major category, which explains why XLE has an overweight overall ranking, and RYE's is only marketweight,” Glickman said.