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Tap Strong Outperformance From These Energy Stocks

Selena Maranjian
July 17, 2012

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the energy industry to thrive over time, as our planet's population keeps growing and demanding more power, the Energy Select Sector SPDR ETF (NYSE: XLE  ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in a lot of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The energy ETF's expense ratio -- its annual fee -- is a very low 0.18%.

This ETF has performed very well, handily beating the world markets over the past three, five, and 10 years. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

With an ultra-low turnover rate of 3%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.

What's in it?
Many energy companies have not turned in the strongest performances over the past year, but they could see their fortunes change in the coming years. Halliburton (NYSE: HAL  ) , for example, plunged 45%, but it's one of the world's largest fracking specialists, and is poised to benefit from an uptick in deepwater drilling and from providing necessary maintenance services to many oil rigs.

Chesapeake Energy (NYSE: