ETF overview: Oil & Gas, Health Technologies and Industrial Services

Let's discover 3 ETFs that have a direct or indirect link with the energy transition. Respect for the environment and the development of innovative industries is essential to ensure a "green" future. In addition to providing capital to these types of industries, you will be able to gain exposure, at a lower risk than equities, to three distinct sectors that are in full trend and have strong growth potential. However, these industries must be able to meet the technological and climatic challenges they will face while adopting sound and profitable business models in the long term. Here's our selection of ETFs: the Health Care Select Sector SPDR Fund ETF (XLV), the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), and the Industrial Select Sector SPDR Fund (XLI).

The health Care Select Sector SPDR Fund ETF (XLV):

XLV seeks to provide investment results that correspond generally to the price and yield performance of the health Care Select Sector Index. Moreover, most of the S&P’s health care companies belongs to this ETF, it tilts heavily toward mega-caps. The yearly performance ended by a small gain of 0,17%, but thanks to the exposure’s focused to leading health care names, XLV is tough to beat (market cap of $23.83 billions).

What's good about this ETF:

The health care’s sector has always been a top investment sector. Despite many different investments, the most profitable investment from the Oracle of Omaha was made in this sector with The Gillette Company (Procter & Gamble Company) Johnson & Johnson (JNJ), and The Procter & Gamble Company (PG). Investments in this sector are affected by many variables, including positive trends related to demographics and negative trends related to reimbursement. XLV dominates the US health care segment on practically every measure. It provides exposure to companies based in different areas (pharmaceuticals, health care equipment, biotechnology…).

 

The SPDR S&P Oil & Gas Exploration & Production ETF (XOP):

The XOP seeks to replicate as closely as possible the total return performance of the S&P Oil & Gas Exploration & Production Select Industry Index. The ETF includes 61 companies (60 U.S. including 1 Canadian) for a 71.54% increase in the last year.

What's good about this ETF:

The energy sector is the sector that has seen the largest growth in the past year with 55.71%.  We are at the dawn of a revolutionary transition in energy production and storage and these innovations. It is essential for a country to diversify its production sources. The energy produced from wind, hydraulic, etc., are important and should serve as reserves.

With a strong progression last year, a growing craze for the energy sector and rising forecasts for the next few years, this ETF can be interesting for people wishing to diversify their portfolios and start investing in this sector. Moreover, the volatility and associated risks of this ETF remain low for a capitalization of $5,928 million.

 

The Industrial Select Sector SPDR Fund (XLI): 

XLI tracks industrial-sector stocks drawn from S&P 500. The sector’s yearly performance has been the second highest (after the Energy Mineral sector) with an important gain of 21.01%. The top-companies who belong in this ETF are among the biggest in the sector and it contains 72 companies.

What's good about this ETF:

XLI provides US industrial exposure. The ETF is comprised of companies within the S&P 500, limiting its small and midcap exposures to favorize big cap exposures. This strategy was chosen because in the industrial sector, the small-cap make up only a fraction of it. It allows investors to take strategic or tactical positions at a more targeted level than traditional style-based investing. The volatility of this ETF is pretty low, as the risk which allows a comfortable annual return of 14,5%.