President Obama's fresh environmental plan has proved to be
beneficial for renewable energy stocks. Alternative energy is the
most happening thing in the energy sector now in the wake of
widespread concerns over carbon emission, climate change and
other pressing environmental issues. (Read:
Can Solar ETFs Continue Their Rally in 2014?
MKT VEC-GLBL AE (GEX): ETF Research Reports
ISHARS-GL CL EN (ICLN): ETF Research Reports
PWRSH-GLB CL-EY (PBD): ETF Research Reports
PWRSH-W CL EGY (PBW): ETF Research Reports
NASDAQ-CL EDG G (QCLN): ETF Research Reports
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A major growth area in the renewable space is solar energy.
Following a listless 2011, the solar industry rallied in 2013.
The U.S. Energy Information Administration (EIA) estimates that
U.S solar demand increased more than 32% in 2013. For 2014, the
EIA projects that
U.S. solar energy consumption will boom by roughly 35%. The
expected increase in demand is likely to fuel top-line growth at
the solar manufacturers (Read:
Best ETF Strategies for 2014
). It is likely that for the first time in more than 15 years the
U.S. has installed more solar capacity than the world leader
While U.S. and China have been playing a big role in recent years
in driving the industry, other nations are also pushing hard to
have a home-grown solar generation capacity as a remedial measure
to solve their electricity crisis. The latest to join this list
is Asia's third largest economy, India. The country recently
planned for a $4.4 billion solar plant which could perhaps be the
world's largest. (Read:
3 Sector ETFs Surging to Start 2014
Again, in Japan, companies like
First Solar Inc.
(FSLR) are investing substantially to install emission-free
renewable set-ups. The country is expected to become the second
largest market for solar products after China. This comes on the
heels of Japan deactivating all its nuclear reactors after the
Fukushima nuclear disaster. First Solar - the largest U.S. solar
company - is teaming up with Japanese counterparts to develop,
build and operate solar power plants.
Among the other alternative energies, the U.S. wind industry is
now gradually picking up. EIA expects wind capacity to expand
8.8% in 2014 to about 66 gigawatt (GW) and 14.6% to over 75 GW at
the end of 2015. Electricity generation from wind is projected to
increase by 2.2% this year and 11.4% in 2015, contributing over
5% of total electricity generation by the end of 2015 (Read:
Alternative Energy Stock Outlook - Feb 2014
Again, hydropower is considered as the leading renewable energy
source in the U.S. With the emergence of new technologies, like
marine and hydrokinetics, this industry is likely to continue to
generate vast amounts of sustainable energy throughout the
ETFs to Tap the Sector
For investors seeking to play this trend in ETF form, the
following series of alternative energy ETFs could make for
WilderHill Clean Energy Portfolio
Launched in March 2005, PBW tracks the WilderHill Clean Energy
Index and manages an asset base of $211.9 million which it
invests in a portfolio of 53 stocks.
It is well diversified across various sectors. Information
Technology takes the top spot with a 44.01% allocation followed
by Industrials (23.24%) and Energy (9.55%).
The fund's top 10 holdings jointly contribute 26.43% towards the
fund. The product invests almost 90% in companies related to
cleaner energy and it charges a hefty 70 basis points in fees.
PBW has rewarded investors with solid returns of 43.66% over the
past one year.
Market Vectors Global Alternative Energy ETF
Launched in May 2007, GEX tracks the Ardour Global Index,
focusing on companies that are primarily engaged in the business
of alternative energy comprising solar power, bio energy, wind
power, hydro power and geothermal energy.
The fund holds about 31 stocks in its pocket and has assets under
management of $96.2 million and charges an expense ratio of 62
basis points annually. The fund is liquid with 12,483 shares
changing hands in a day on an average.
Apart from robust holdings in the U.S., the product offers solid
exposure to Europe and some Asian countries. Again, Industrials,
Information Technology and Utilities take the top three spots,
adding 86.1% in sector holdings. Further, the fund's top 10
holdings jointly contribute 64.89% to the fund.
Tesla Motors Inc.
Vestas Wind Systems A/S
are the top three holdings, with 28.71% of asset allocation in
Global Clean Energy Portfolio
This ETF follows the WilderHill New Energy Global Innovation
Index, giving investors exposure to about 101 companies that are
engaged in renewable sources of energy and technologies
facilitating cleaner energy.
Assets under management come in at just over $89.3 million and
this ETF charges investors 75 basis points a year in fees. In
terms of performance, PBD has rewarded investors with solid
returns of 43.47% in a one-year span. The fund's top 10 holdings
contribute 17.41% to it.
PBD is heavy in Information Technology, as this represents 36.04%
of the fund. This is followed by Industrials (31.43%) and
Utilities (19.52%). In terms of countries, the U.S. dominates
with 32.04% followed by China having 15.09%.
First Trust Nasdaq Clean Energy Green Energy
This ETF tracks the NASDAQ Clean Edge Green Energy Index and
follows a benchmark of clean energy companies, giving exposure to
42 such companies in total with an asset base of $128.0 million.
The fund charges investors 60 basis points a year in fees for the
exposure. The top 10 holdings comprise 60.41% of the total fund.
Importantly, this product has rewarded investors with a solid
one-year return of 72.09%.
Technology firms dominate this ETF, accounting for 38.02% of the
assets. Beyond technology though, Oil and Gas stocks make up
about 22.26%, while Industrials, Consumer Goods and Utilities
hold 16.95%, 10.55% and 6.79%, respectively. In terms of
geographical diversification, the fund is almost entirely focused
on the U.S. market.
iShares Global Clean Energy ETF
This ETF tracks the S&P Global Clean Energy Index with 31
holdings and an asset base of $47.8 million. ICLN has given an
impressive one-year return of 41.36% and charges investors 48
basis points a year in fees for the exposure.
In terms of geographical breakdown, Japan leads the list with
20.33%, while the U.S. holds the second spot with 19.87%. China
comes third occupying 17.37% of the holdings. ICLN is more
inclined toward electric utilities, representing 26.66% of the
fund, though independent power producers and energy traders
(25.14%), semiconductor and semiconductor equipment (22.12%), and
electrical equipment (15.59%) all receive big chunks as well. The
fund appears to be highly concentrated in the top 10 holdings
with a share of 50.58%.
Since the pulse of the alternative energy industry is closely
tied to the swings in the macro-economy, until the picture
becomes rosier we do not expect to witness many stand-alone
alternative energy companies.
Recent moves in the sector have been encouraging, and if these
trends continue, there are clearly more gains that can be had for
risk-tolerant investors looking for a new play in the space.
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