VDE returned 17.8% over the past year, XOP returned 12.1%. The gap comes down to market-cap versus equal-weight. Costs, dividends, and concentration risk all favor VDE.
Two energy ETFs, two weighting schemes, two return profiles. The Vanguard Energy ETF (VDE) and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) both track U.S. energy, but their construction produces a gap that has widened to nearly six percentage points over the past year.
VDE returned 17.8% total over the trailing 12 months. XOP returned 12.1%. The difference is not sector exposure – it is weighting.
VDE is a market-cap-weighted fund with 111 holdings. Its top three – ExxonMobil (XOM), Chevron (CVX), and ConocoPhillips (COP) – account for more than 40% of the portfolio. ExxonMobil alone is a 21.5% position. Chevron sits at 13.5%. ConocoPhillips makes up 5.5%. When the integrated majors rally, VDE rallies with them.
XOP uses a modified equal-weight approach. No single stock exceeds 4% of the portfolio. The fund holds 51 names, all in exploration and production. PBF Energy (PBF), Par Pacific (PARR), and Delek US (DK) are the top three, each between 3% and 3.5%. The concentration risk is lower, but the fund misses the mega-caps that drive VDE's returns.
Costs compound the gap. VDE charges 0.09% in expenses. XOP charges 0.35%. Over a decade, that 26-basis-point difference eats into returns. VDE's trailing dividend yield is 2.7%, versus 2.1% for XOP. The Vanguard fund has paid $4.03 per share over the trailing 12 months. XOP has paid $3.25.
The VDE vs. XOP question is effectively a bet on mega-cap integration versus diversified upstream exposure. When Exxon and Chevron rally, VDE wins. When smaller producers outperform, XOP catches up. The equal-weight structure also dampens the downside from a single stock blowup.
For investors who want broad energy exposure with lower costs and a higher dividend, VDE is the cleaner choice. The trade-off is that three stocks drive the fund. XOP offers a hedge against that concentration, but at a higher fee and a narrower focus on the upstream segment.
The energy sector's performance is closely tied to crude oil prices. The recent rally in oil has lifted both funds, but the weighting differences have caused VDE to outpace XOP by nearly 6 percentage points in the past year. On the commodities analysis page, the sector's momentum may carry both ETFs higher if oil holds above $80.
AlphaScala's proprietary score for CVX is 52 out of 100, a Mixed label. COP scores 58, a Moderate label. Neither stock is a standout on its own, but the sector's momentum may still carry the ETFs higher if oil holds above $80.
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Prepared with AlphaScala editorial tooling from the source reporting linked above. Indexable analysis may include a cited Alpha Score value. Publishing checks screen each story before release. Educational coverage, not personalized advice.