By 2050, 30% of the world’s energy will be provided by alternative sources such as solar energy, wind energy, biofuel and biomass, ethanol and fuel alcohol and hydroelectric energy sources. These renewable sources are badly needed in order to lower the footprint of a growing global economy fueled by hydrocarbons. Herein lies the opportunity as the use of clean alternative energy sources is on the path of growth for decades to come. If you’re not up for stock picking, there’s a number of ETFs holding a basket of alternative energy stocks.
These Green ETFs are suitable for long term investors seeking to add this component to a well-diversified portfolio.
Market Vectors® Global Alternative Energy ETF (NYSE: GEX)
gex $59.8004 [-0.4286]
Average Volume: 5530
GEX is designed to replicate, net of fees, the price and yield performance of the Ardour Global Index. The index holds around 30 stocks from a global universe of companies that derive more than 50% of their revenue from the alternative energy industry. GEX is geographically diversified holding predominantly medium-cap and large-cap companies operating in North America (>60%), Europe and Asia. The fund was first launched in May of 2007.
iShares S&P Global Clean Energy Index Fund (NYSE: ICLN)
icln $9.17 [+0.02]
Average Volume: 66148
ICLN seeks to replicate the price and yield performance, net of fees, of the S&P Global Clean Energy Index. The index holds 30 of the most liquid and tradable global companies from the listed clear energy universe. These companies are involved in clean energy production, clean energy equipment and technology providers. ICLN provides investors with a balanced geographical weighting compared to GEX along with a lower MER. The fund was first launched in june of 2008.
PowerShares WilderHill Clean Energy Portfolio ETF (NYSE: PBW)
PBW $4.66 [+0.03]
Average Volume: 106156
Launched back in March of 2005, PBW was the first Alternative Energy ETF. PBW tracks the WilderHill Clean Energy Index which holds a selection of companies focused on renewable sources of energy. The fund holds more than 50 stocks with more than 70% in small cap companies and is rebalanced and reconstituted on a quarterly basis.
Live ONE YEAR Chart of the PowerShares WilderHill Clean Energy Portfolio ETF– Symbol PBW
First Trust NASDAQ Clean Edge ETF (NYSE: QCLN)
QCLN $19.09 [+0.07]
Average Volume: 32170
Launched in February of 2007, QCLN tracks an equity index called the NASDAQ® Clean Edge® Green Energy Index. The index is designed to track the performance of clean energy companies that are publicly traded in the United States and includes companies engaged in manufacturing, development, distribution and installation of emerging clean-energy technologies including solar photovoltaics, biofuels and advanced batteries. Reconstituted twice a year in March and September and rebalanced quarterly, the index is heavily weighted to Technology (>40% weighting). The index holds 46 stocks with a median market cap of $0.6B.
PowerShares Cleantech Portfolio ETF (NYSE: PZD)
PZD $40.87 [+0.18]
Average Volume: 8306
PZD tracks the Cleantech Index which holds around 60 stocks of leading cleantech companies. The fund is geographically weighted to the US (>50%) with the industrial sector accounting for more than 58% in weighting. The fund was first launched in October of 2006.
PowerShares Global Clean Energy Portfolio ETF (NYSE: PBD)
PBD $12.76 [-0.03]
Average Volume: 9655
PBD tracks the WilderHill New Energy Global Innovation Index. The index, first launched in June of 2007, holds more than 90 secutiries of companies focused on greener and generally renewable sources of energy and technologies facilitating cleaner energy. While it is the most diversified ETF in the list its expense ratio is the highest. Almost 50% of the fund’s holding are small cap companies.
Pick your ETF carefully keeping in mind that many sub-sectors in the alternative energy sphere such as wind and solar are dependant on government subsidies to generate their business. You have to think long term with this investment; consider the management expense ratio (lower = better),the importance of yield, preferred geographic diversification and industry concentration. Finally, a global energy ETF also offers geographical diversification by holding equities of exploration and production companies operating all over the world.
Disclaimer: the information presented above is only for informative purposes. It is in no way an encouragement to buy or sell the aforementioned securities.