Vanguard Energy Index Fund ETF Shares (VDE)VDE

ETF Summary: VDE - Vanguard Energy Index Fund ETF Shares

Profile:

VDE is an ETF that tracks the performance of the MSCI US Investable Market Energy 25/50 Index. This means it invests in a diversified portfolio of large, mid, and small-cap US energy companies, with a focus on oil & gas exploration and production, equipment & services, and integrated energy companies. It has a market capitalization-weighted approach, meaning companies with larger market values have a greater influence on the fund's performance. VDE does not actively manage its portfolio and aims to replicate the benchmark index as closely as possible.

Objective:

The primary objective of VDE is to provide investors with a low-cost way to gain exposure to the broad US energy sector. It seeks to track the performance of its benchmark index before fees and expenses.

Issuer:

Vanguard

• Reputation and Reliability: Vanguard is one of the world's largest and most reputable investment companies, known for its low-cost funds and transparent approach.
• Management: The ETF is managed by Vanguard's experienced team of portfolio managers who have a deep understanding of the energy sector and passive investing strategies.

Market Share:

VDE is the largest US energy sector ETF by assets under management, holding a market share of approximately 37.16% as of August 31, 2023.

Total Net Assets:

As of August 31, 2023, VDE has total net assets of $36.92 billion.

Moat:

• Low Cost: VDE has an expense ratio of just 0.10%, making it one of the cheapest ways to gain exposure to the US energy sector.
• Diversification: VDE invests in a broad range of energy companies, which helps mitigate risk and enhance portfolio diversification.
• Liquidity: VDE has a high average daily trading volume, making it easy to buy and sell shares.

Financial Performance:

• VDE has delivered a return of 16.65% over the past year (as of August 31, 2023).
• Over the past 3 and 5 years, VDE has outperformed the S&P 500, delivering returns of 37.60% and 89.51% respectively, compared to the S&P 500's 24.64% and 62.65%.

Growth Trajectory:

The energy sector is expected to grow in the coming years, driven by increasing global demand for energy and rising oil prices. VDE is well-positioned to benefit from this growth trajectory, given its broad exposure to the sector.

Liquidity:

• Average Trading Volume: 8.6 million shares per day (as of August 31, 2023)
• Bid-Ask Spread: 0.02% (as of August 31, 2023)

Market Dynamics:

• Economic Indicators: Strong economic growth and rising consumer confidence tend to be positive for the energy sector.
• Sector Growth Prospects: The growing global demand for energy and the transition towards renewable energy sources are expected to drive long-term growth in the energy sector.
• Current Market Conditions: Rising inflation and interest rates, as well as geopolitical tensions, can create volatility in the energy sector.

Competitors:

• XLE - Energy Select Sector SPDR Fund: 35.13% market share
• IYE - iShares US Energy ETF: 21.41% market share
• IDU - iShares S&P US Energy Sector ETF: 6.30% market share

Expense Ratio:

0.10%

Investment Approach and Strategy:

• Strategy: Passively tracks the MSCI US Investable Market Energy 25/50 Index.
• Composition: Invests in approximately 120 large, mid, and small-cap US energy companies, with a focus on oil & gas exploration and production, equipment & services, and integrated energy companies.

Key Points:

• Low-cost way to gain exposure to the US energy sector.
• Diversified portfolio of large, mid, and small-cap energy companies.
• Strong historical performance and outperformance against the S&P 500.
• High liquidity and tight bid-ask spread.

Risks:

• Volatility: The energy sector is known for its volatility due to factors such as oil price fluctuations and geopolitical uncertainty.
• Market Risk: VDE's performance is tied to the performance of the underlying energy companies, which can be affected by various factors such as economic conditions, regulations, and technological advancements.

Who Should Consider Investing:

• Investors who want to gain exposure to the US energy sector through a diversified, low-cost ETF.
• Investors who are comfortable with the risks associated with investing in the energy sector.
• Investors who have a long-term investment horizon.

Evaluation of VDE's fundamentals using an AI-based rating system:

Fundamental Rating Based on AI: 8.5/10

Justification: VDE scores highly on several key metrics, including low expense ratio, strong historical performance, and high liquidity. The AI algorithm also considers the fund's broad diversification and its strong management team, which contribute to its overall attractiveness. However, it is important to note that the energy sector is inherently volatile and subject to various risks.

Resources and Disclaimers:

Sources:

• https://investor.vanguard.com/etf/profile/VDE/overview
• https://www.cnbc.com/quotes/VDE
• https://www.morningstar.com/etfs/arcx/vde/quote
• https://www.etf.com/sectional/insights-exchange/etf-competitors-XLE-VDE

Disclaimer: This information is for educational purposes only and should not be considered investment advice. Please consult with a financial professional before making any investment decisions.