Vanguard Energy ETF Outperforms VanEck Uranium and Nuclear ETF -- but Only Just

The Vanguard Energy ETF (NYSEMKT:VDE) offers low-cost, broad exposure to traditional fossil fuel giants, whereas the VanEck Uranium and Nuclear ETF (NYSEMKT:NLR) provides a concentrated, higher-cost focus on the global nuclear power value chain.

Investors weighing these two options are choosing between a specific bet on the nuclear energy renaissance and a broad play on the entire U.S. energy sector. While the VanEck fund tracks the global nuclear industry value chain, the Vanguard fund captures the heavyweights of the domestic oil, gas, and coal markets.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The Vanguard ETF is the more affordable choice for long-term holders, with an expense ratio of 0.09% that is significantly lower than the 0.52% charged by the VanEck fund. Both ETFs offer comparable dividend payouts.

Performance & risk comparison

What's inside

The Vanguard ETF targets businesses involved in discovering and producing crude oil, natural gas, and coal. Its portfolio is 100% concentrated in the energy sector across 111 holdings. Largest positions include ExxonMobil (NYSE:XOM) at 21.98%, Chevron (NYSE:CVX) at 14.21%, and ConocoPhillips (NYSE:COP) at 5.78%. The fund was launched in 2004 and paid $3.93 per share in dividends over the trailing 12 months. This fund offers deep liquidity and high assets under management (AUM) for investors seeking exposure to traditional energy majors.

By contrast, the VanEck ETF focuses on uranium mining and nuclear power generation. It holds 28 positions with a sector mix of energy at 45%, utilities at 38%, and industrials at 15%. Top holdings include Cameco (NYSE:CCJ) at 8%, Constellation Energy (NASDAQ:CEG) at 7.78%, and BWX Technologies (NYSE:BWXT) at 6.82%. It launched in 2007 and has a trailing-12-month dividend payout of $3.17 per share. While more expensive than its Vanguard counterpart, it provides unique access to the infrastructure and fuel requirements of the nuclear utility industry.

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What this means for investors

An interesting thing to note about VDE is that while it holds over 100 stocks, its top three positions -- Exxon, Chevron, and ConocoPhillips -- account for roughly 42% of the portfolio. The top 10 holdings make up over 60% of the portfolio. So these stocks are going to have an outsize impact on the ETF's performance.

By contrast, NLR is comparatively less concentrated, even though it has fewer stocks. Its 28 holdings span three sectors, and no position exceeds 9%. The top three stocks make up about 23% of the portfolio (the top 10 account for 58%). The VanEck ETF has slightly underperformed relative to VDE in recent years, and it's also significantly more expensive. However, its dividend stacks up pretty well versus the Vanguard fund.

I think choosing between these ETFs is less about comparing numbers and more about the specific types of companies you want to invest in (and over what time frame). In other words, does your image of the future include ever-rising consumption of fossil fuels? Or do you see continued gains for the nuclear industry?

Also, it may not be an either/or situation. For diversification purposes, an investor might be interested in buying shares of both VDE and NRL.

Erin Kennedy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends BWX Technologies, Cameco, Chevron, and Constellation Energy. The Motley Fool recommends ConocoPhillips. The Motley Fool has a disclosure policy.