Clean Energy ETFs: Thrive With These Two Broad Funds - ETF News And Commentary
March 15 2012 - 7:15AM
Zacks
Although oil prices remain high, clean energy stocks have had
trouble coming back from their terrible 2011 performances. While it
is true that most funds in the space have seen solid returns in
2012 so far, the gains have done little to ease the pain not just
of last twelve months, but indeed of several of the past years in
the sector.
Given the lack of available government subsidies, a push towards
natural gas, and extreme competition in the clean energy market,
many believe that the hurt could continue for this downtrodden
sector as we head further into the year. Strong prices for oil have
had a troublingly small impact on a push towards clean energy
sources suggesting that many investors have put off investing in
this space for the time being (See Inside The Forgotten Energy
ETFs).
This is especially true given the ongoing budget worries in many
of the key clean energy markets in Europe, and fears over a
slowdown in China. If these two markets, which are among the most
important ones for various alternative energy segments, look likely
to remain subdued, it will be hard for many investors to stay
bullish on this sputtering market segment (read Follow Buffett Into
Clean Energy With These Solar ETFs).
So while double digit gains have been in some of the most
popular segments of the market—such as a nearly 11% jump in the
Guggenheim Solar ETF (TAN) this year—returns have
already begun to fall in recent trading sessions. In fact, TAN has
slumped by nearly 20% in the past month alone, suggesting that the
bear market in some types of clean energy is already back.
Yet, with that being said, some broader segments of the have
been holding up better—both in the short and long term—and could be
more attractive picks for investors in the space. These ETFs could
be ideal for investors seeking to make a bet on clean energy at
large, but are worried about some of the major issues hitting the
solar and wind segments at this time. For those intrigued by this,
any of the following ETFs could make for better choices in the
clean energy world:
PowerShares WilderHill Progressive Energy Portfolio
(PUW)
This little-known ETF tracks the WilderHill Progressive Energy
Index, which is a benchmark that focuses on the following
industries; alternative energy, power efficiency, emission
reduction, and new energy sources. This focus results in a global
fund that has roughly 54 securities, charging investors 70 basis
points a year in fees (read Three ETFs For A Nuclear Power
Renaissance).
The ETF is heavily focused on industrials (46%) while energy
firms account for another twenty percent of assets. From a country
perspective, American securities occupy roughly two-thirds of the
fund, putting a great distance between itself and second place
Canada (11%), and third place Brazil (5%). Top individual holdings
include Tata Motors (TTM) and Methanex
(MEOH), although investors should note assets are pretty
well spread out among components.
In terms of performance, PUW shines when compared to the solar
ETF, TAN. PUW has outperformed TAN by about 750 basis points in
year-to-date terms, although the trailing twelve month period is
even more impressive. In this time frame, PUW is down about 6.6%
while TAN has lost a whopping 64.7%, demonstrating how vital
diversification can be in this corner of the market.
PowerShares Cleantech Portfolio (PZD)
For another option in the cleantech space, investors can take a
look at PZD. The fund tracks roughly 70 companies that are engaged
in the broad cleantech industry with a focus on improving
efficiency or performance. The ETF is equally-weighted, charges
investors about 67 basis points a year, but sees solid AUM of a
little over $100 million.
This fund also has a focus on industrials (54%) although tech
companies comprise another 29% of assets. In fact, energy firms do
not really make up an allocation at all, instead putting the focus
on firms in the machinery, electrical equipment, and semiconductor
industries (read Have The Natural Gas ETFs Finally Bottomed
Out?).
In terms of country exposure, U.S. firms account for the
majority at just over 54%, while European firms account for another
third of assets. The fund also has a decent breakdown between cap
levels, as no one segment makes up more than 35% of the total. Top
individual holdings include weights to French firm
Schneider Electric (SBGSY), and then two American
companies; BorgWarner (BWA), and Autodesk
(ADSK).
For performance, PZD has also outperformed TAN, although by a
much smaller margin. It has outgained the solar ETF by about eight
basis points in year-to-date terms, and has outperformed over the
past 52 weeks by a margin of -12% to -64.7%. While this performance
has not been as good as PUW, the volume on PZD is better implying
that it may have tighter bid ask spreads for most investors.
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AUTODESK INC (ADSK): Free Stock Analysis Report
BORG WARNER INC (BWA): Free Stock Analysis Report
METHANEX CORP (MEOH): Free Stock Analysis Report
TATA MOTORS-ADR (TTM): Free Stock Analysis Report
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