Cashing in on Texas Tea

July 29, 2004

With crude oil prices continuing to soar, the oil sector has become all the rage. John Spence takes a look at natural resources ETFs.

With oil prices on the rise and increased uncertainty over the situation in the Middle East, oil prices have been steadily rising.  Exchange-traded funds focusing on natural resources and the energy sector have been some of the hottest performers so far this year.

In this column we'll take a look at the iShares Goldman Sachs Natural Resources (ticker: IGE) and compare how it stacks up against its peers.  The ETF has raked in the cash this year - it currently has $260 million in assets, about half of which has come in this year, said Calvin Lee, sector ETF manager at Barclays Global Investors.  The fund, which was launched in October of 2001, has an expense ratio of 0.50 percent.

As of July 23, year-to-date IGE is up 7.85%, according to Morningstar, which makes it the seventh-best ETF performer over the period.  As we'll see, the resources ETFs that are more concentrated in the oil sector have done even better over this time period.  The rapid recent run-up of crude oil prices make the reason for the sector's outperformance no secret.

1-year daily returns for IGE (blue line) vs. the S&P 500 (red line), Source: CBS MarketWatch.com

The table below shows the performance of the natural resources ETFs, including Vanguard's new Materials Vipers, sorted by year-to-date returns.

ETF name (ticker) Expense Ratio YTD return 1 month 3 month 1 year 3 year
Energy Select Sector SPDR XLE
0.28%
16.53%
1.02%
6.20%
38.27%
4.77%
iShares Dow Jones US Energy IYE
0.60%
15.46%
1.25%
5.67%
37.52%
6.51%
iShares S&P Global Energy Sector IXC
0.65%
9.48%
-0.46%
3.44%
34.38%
---
iShares Goldman Sachs Natural Resources IGE
0.50%
7.85%
-0.73%
3.54%
33.06%
---
Vanguard Materials VIPERs VAW
0.28%
---
-3.58%
-2.43%
---
---

Source: Morningstar, all data as of 7/23/04

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