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Should You Invest in the Fidelity MSCI Energy Index ETF (FENY)?

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If you're interested in broad exposure to the Energy - Broad segment of the equity market, look no further than the Fidelity MSCI Energy Index ETF (FENY - Free Report) , a passively managed exchange traded fund launched on 10/21/2013.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 10, placing it in bottom 38%.

Index Details

The fund is sponsored by Fidelity. It has amassed assets over $344 M, making it one of the larger ETFs attempting to match the performance of the Energy - Broad segment of the equity market. FENY seeks to match the performance of the MSCI USA IMI Energy Index before fees and expenses.

MSCI USA IMI Energy Index represents the performance of the energy sector in the U.S. equity market.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.08%, making it the least expensive product in the space.

It has a 12-month trailing dividend yield of 8.53%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Energy sector--about 99.60% of the portfolio.

Looking at individual holdings, Exxon Mobil Corp (XOM) accounts for about 21.84% of total assets, followed by Chevron Corp (CVX) and Conocophillips (COP).

The top 10 holdings account for about 69.78% of total assets under management.

Performance and Risk

So far this year, FENY has lost about -24.61%, and is down about -26.45% in the last one year (as of 03/02/2020). During this past 52-week period, the fund has traded between $11.88 and $18.79.

The ETF has a beta of 1.25 and standard deviation of 20.50% for the trailing three-year period, making it a high risk choice in the space. With about 120 holdings, it effectively diversifies company-specific risk.

Alternatives

Fidelity MSCI Energy Index ETF sports a Zacks ETF Rank of 5 (Strong Sell), which is based on expected asset class return, expense ratio, and momentum, among other factors. FENY, then, is not a suitable option for investors seeking exposure to the Energy ETFs segment of the market. However, there are better ETFs in the space to consider.

Vanguard Energy ETF (VDE - Free Report) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR ETF (XLE - Free Report) tracks Energy Select Sector Index. Vanguard Energy ETF has $2.51 B in assets, Energy Select Sector SPDR ETF has $8.12 B. VDE has an expense ratio of 0.10% and XLE charges 0.13%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


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