The PowerShares WilderHill Progressive Energy Portfolio
(NYSEArca:PUW) has been quietly beating the entire universe of
global energy and renewable energy
over the past year.
It's somewhat of a hybrid ETF, focusing neither on renewable nor
traditional energy companies.
Instead, PUW holds companies that try to improve on the use of
typical energy sources like oil, natural gas and coal, by either
increasing their efficiency or reducing their pollution.
In other words, it may be the ideal way to capture green
sentiments without the difficulties facing the truly green
renewable energy sources like solar or wind energy.
Solar ETFs, like the Guggenheim Solar ETF (NYSEArca:TAN) or
Market Vectors Solar Energy ETF (NYSEArca:KWT) have tanked over the
past year, losing over 30 percent each.
Wind energy ETFs, like the First Trust ISE Global Wind Energy
ETF (NYSEArca:FAN) or the PowerShares Global Wind Energy ETF
(NYSEArca:PWND), didn't do quite as badly, but still lost money:3.5
and 7.3 percent, respectively.
Solar and wind energy have both recovered a bit lately, driven
partly by Berkshire Hathaway's announcement that it was paying $2.5
billion for solar projects from SunPower and partly by the
temporary resolution of the U.S. "fiscal cliff." KWT in particular
has returned about 35% in recent weeks.
Still, the longer-term losses are simply staggering, and there's
nothing to imply that demand will suddenly swing up without (or
even with) more government subsidies.
For those who believe that society is about to embrace-and be
willing to pay for-putting solar panels on every roof and figure
out how to store enough energy to stay warm in the winter, TAN and
KWT could be great investments.
Similarly, if you think wind energy is capable of powering cars
and have space in your backyard for a few windmills and, moreover,
aren't worried about all the birds that apparently get killed by
windmills every year, you can go for FAN, as PWND is getting shut
down in February.
I'm being a little facetious, since renewable energy could
potentially be a great supplementary source of energy, but I don't
think that time is now.
Thus, I like PUW.
The fund's top holdings include Denison Mines, a uranium mining
company; Rentech Inc., a company that creates synthetic fuels from
biomass and waste materials; and LSB Industries, which, among other
things, produces geothermal heat pumps that reduce energy
Technology that cleans up traditional sources of energy is easy
to get behind.
Big energy companies prefer it, since it's preferable to clean
up factories rather than to shut them down.
The incentives are there for mom and pop as well-upgrading to an
energy-efficient refrigerator or washer/dryer is cheaper than
installing solar panels and the necessary infrastructure to keep
your house running on a cloudy day or at night. And it comes with
quantifiable savings on your energy bill.
Given the solid investment thesis, the lack of interest in PUW
is surprising-it has just $40 million in assets, peanuts compared
with the $1 billion held by the iShares S&P Global Energy ETF
(NYSEArca:IXC) that it beat by 9 percentage points over the last
PUW's 12 percent return over the past year is three times IXC's
4 percent, which easily earns back the difference in trading costs
and expense ratios.
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