Meet This Year's Best Energy ETF

This has been another rough year in the energy patch as the sector is the worst-performing group in the S&P 500. Down almost 20 percent this year, the Energy Select Sector SPDR XLE is the worst performer among the nine sector SPDR exchange traded funds while Exxon Mobil Corp. XOM and Chevron Corp. CVX, the two largest U.S. oil companies, are two of the worst-performing stocks in the Dow Jones Industrial Average.

It has not just been equity-based oil ETFs that have disappointed. Slumping oil prices have been a drain on some alternative energy funds. Just look at the Guggenheim Solar ETF TAN. Solar stocks still have an oil problem— as in falling oil prices are problematic for the solar industry because inexpensive oil takes some of the shine off alternative fuel sources. As a result, TAN, the largest solar ETF, is off nearly seven percent this year.

That does not mean all alternative energy ETFs have been duds this year. The First Trust ISE Global Wind Energy ETF FAN is up more than 13 percent year-to-date, making it the best-performing energy ETF of any stripe.

The $44.1 million FAN, which debuted seven and a half years ago, follows the capitalization-weighted ISE Global Wind Energy Index. FAN's index requires companies to have market values of at least $100 million to be included and those firms “must be actively engaged in some aspect of the wind energy industry such as the development or management of a wind farm, the production or distribution of electricity generated by wind power, involvement in the design, manufacture or distribution of machinery or materials designed specifically for the wind energy industry,” according to First Trust. 

Earlier this year, some major U.S. banks pledged to boost investments in alternative energy. In late September, six companies, including JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley, pledged to cooperate to raise investments in renewable energy, reports CNBC.

Home to 43 stocks with a median market value of $4.7 billion, FAN's holdings hail from 10 countries. Including Hong Kong as part of China, Chinese stocks account for over 13 percent of FAN's weight with developed markets occupying the rest of the ETF's geographic weight. Spain is FAN's largest country weight at 21.2 percent while U.S. are the ETF's third-largest geographic allocation at 12.8 percent.

Familiar names in FAN's lineup include Duke Energy Corp. DUK, BP Plc BP and General Electric Co. GE. FAN is up nearly five percent in the past month, prompting some positive chatter about the ETF's technical situation.

“The momentum is also supportive, as the RSI has made higher lows while price was flat to down. This price action is bullish in our opinion,” according to Captain John Charts.