Our goal in this profile is to help investors wade through the many competing ETF offerings available. Using our long experience as an ETF publication, we can help select those ETFs that matter and may not be repetitive. The result is a more manageable list of issues from which to choose from.
There are currently less than 20 ETFs oriented to the alternative energy sector. Many are struggling to gain AUM (Assets under Management) and performance success. Some may not succeed as new technologies come and go. Previously nuclear energy held great promise until the Fukushima plant disaster despite its age and unique circumstances blunted growth in the sector.
The energy sector remains volatile and politically controversial given the recent higher spikes in prices in 2008 and 2011. The struggle to move away from carbon based energy sources seems now and again promising, but then not. Any success will take years and decades to achieve success. This adds to the risks of investing in the sector. As a result you'll note AUM (Assets Under Management) are lower in the sector and performance has been less than conventional energy ETFs.The following analysis features a fair representation of ETFs available. We believe from these investors may choose an appropriate ETF to satisfy the best index-based offerings individuals and financial advisors may utilize. ETFs are based on indexes tied to well-known index providers including Russell, S&P, Barclays, MSCI, Dow Jones and so forth. Also included are some so-called "enhanced" indexes that attempt to achieve better performance through more active management of the index. Where competitive issues exist and/or repetitive issues available at a superior fee cost saving we mention those as other choices. The following is our stars ranking procedure with a brief description of the ranking rationale:
Strong established linked index
Excellent consistent performance and index tracking
Low fee structure
Strong portfolio suitability
Established linked index even if "enhanced"
Good performance or more volatile if "enhanced" index
Average to higher fee structure
Good portfolio suitability or more active management if "enhanced" index
Enhanced or seasoned index
Less consistent performance and more volatile
Fees higher than average
Portfolio suitability would need more active trading
Average to below average liquidity
Index is new
Issue is new and needs seasoning
Fees are high
Portfolio suitability also needs seasoning
Liquidity below average To add value, we feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short. Premium members to the ETF Digest receive added signals when markets become extended such as when DeMark indicators trigger a direction to exit overbought/oversold conditions. Generally, these indicators when used in this manner have helped investors avoid sharp declines from trend exhaustion. Since the previous write up in June 2011, AUM in the sector have fallen dramatically with some down by 50% since that report. This reflects growing fears of poor energy policy decisions, recession and possible bear market. #1: PowerShares WilderHill Clean Energy ETF (PBW)
PBW (PowerShares WilderHill Clean Energy ETF) is based on the WilderHill Energy Index. It seeks to focus on green energy technologies generally from renewable sources of energy. It was launched March 2005 and I was pleased to interview Professor Wilder then. It is the oldest of the alternative energy ETF issues. The expense ratio is .60%. AUM (Assets under Management) equal $212M and average daily trading volume is around 345K shares. As of late November 2011 the dividend yield is 1.80% and YTD performance is -50.51%.
PBW Top Ten Holdings & Weightings Data as of November, 2011
- ITC Holdings Corp (ITC): 2.42%
- Fuel Systems Solutions, Inc. (FSYS): 2.38%
- Amerigon, Inc. (ARGN): 2.32%
- Rubicon Technology, Inc. (RBCN): 2.31%
- Hanwha SolarOne Co Ltd. (HSOL): 2.31%
- Ameresco, Inc. (AMRC): 2.31%
- Quanta Services, Inc. (PWR): 2.29%
- STR Holdings, Inc. (STRI): 2.28%
- Solazyme Inc (SZYM): 2.26%
- Amyris, Inc. (AMRS): 2.25%