Clean-Energy ETFs Volatile, but Hold Potential
Informative article from TheStreet.com on current state and potential of clean energy ETFs. The securities discussed are (PBW: 18.02 -0.21 -1.15%), (PBD: 25.85 -0.288 -1.10%) and (GEX: 48.25 +0.85 +1.79%). The article mirrors my position that clean energy stocks have had their share prices driven down from unrealistic valuation levels and that long term, they are good growth prospects.
Of the three ETFs discussed, my pick, PBD has fallen the least so far this year, down 25.3% according to the article. My calculations show the fund down 18.9% today, March 28. As I have discussed here before, I like PBD for its global exposure and balanced portfolio.
One item that caught my eye, the Market Vectors Global Alternative Energy ETF (GEX: 48.25 +0.85 +1.79%) has 23% of its assets in 2 securities: Vestas Wind Systems and First Solar (FSLR: 253.65 +5.81 +2.34%). The total portfolio is only 30 securities and I think being that top heavy reduces some of the risk distribution advantage of an ETF. The PowerShares Global Clean Energy Portfolio (PBD: 25.85 -0.288 -1.10%), on the other hand, has 86 securities with a max weighting of 2.09% (source: NEX fact sheet, 12/31/07).
The article also discusses the pros and cons of holding individual stocks in this sector, but I am definitely a fan of the ETF approach here. PBD is a component of this site’s 20 Stock Portfolio. This is a hypothetical portfolio I use to track stocks I am most interested in. All of my holdings are of Portfolio components, but I do not own all of the components of the Portfolio.
Note: I currently do not have a position in PBD.
Filed Under 20 Stocks, Growth, InternationalComments
2 Responses to “Clean-Energy ETFs Volatile, but Hold Potential”
Got something to say?
-
Amazon gift card link
Subscriptions
RSS
I think that as commodity prices demonstrate more volatility, as the developing world continues to grow (even if the rate of growth slows there will still be growth - over the long run) and most importantly as water shortages continue to occur there will be a growing need for alternative energy. I do not think that coal or nuclear is a viable as others might think for three reasons –> 1) both coal and nuclear require significant initial capital outlay - solar and wind energy offer incremental solutions that can be upscaled as finances and engineering requirements permit/require 2) neither wind nor solar require water for cooling - they can be located on the surfaces of farms or warehouses and let what goes on below them maintain productivity — you can have a large farm beneath a wind farm and you can have a large factory or warehouse below a solar array and 3) the commodity markets for energy are volatile, unpredictable and in the long run are inflationary - anything to disconnect the economy from an inflationary force is very appealing.
The “intermitency problem” whereby solar and wind generate electricity in a sporadic fashion is mostly an engineering problem. Creating large scale regional DC electric grids would enable sharing of electric resources across larger regions. Also battery technology and fuel cell technology continues to improve enabling individual homes and businesses to function for short intervals without grid connected electric power.
As is historic for most widescale societal challenges there is a struggle between the established older technology and newer technology. Unfortunately the big electric companies do not welcome the prospect of an entreprenial distributed power generation technology-based solution(s)…
Please see comments posted last year - I think these fundamentals still hold true today.
http://finance.google.com/group/google.finance.715973/browse_thread/thread/7440bbf1a66e3484
Great article - I was looing to invest in the renewable energy trend and these ETFS look like the way to go.