Top 10 Alternative Energy ETFs

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
Excellent liquidity


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
Decent liquidity


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
  1. ITC Holdings Corp (ITC): 2.42%
  2. Fuel Systems Solutions, Inc. (FSYS): 2.38%
  3. Amerigon, Inc. (ARGN): 2.32%
  4. Rubicon Technology, Inc. (RBCN): 2.31%
  5. Hanwha SolarOne Co Ltd. (HSOL): 2.31%
  6. Ameresco, Inc. (AMRC): 2.31%
  7. Quanta Services, Inc. (PWR): 2.29%
  8. STR Holdings, Inc. (STRI): 2.28%
  9. Solazyme Inc (SZYM): 2.26%
  10. Amyris, Inc. (AMRS): 2.25%

 

#2 PowerShares WilderHill Progressive Energy ETF (PUW)

PUW follows the WilderHill Progressive Energy Index which includes issues found within PBW but adds some fossil fuel bridge technologies aimed at cleaner use of these fuels. Additionally, some nuclear issues have been included. The issue was launched October 2006. The expense ratio is .60%. AUM equal $43M with average daily trading volume around 8K shares. Through late November 2011 the annual dividend yield was 1.40% and YTD return of -24.80%.

PUW Top Ten Holdings & Weightings

Data as of November, 2011
  1. Hexcel Corporation (HXL): 2.52%
  2. Centrais Ele. Brasileira S.A. Eletrobras ADR (EBR): 2.40%
  3. Enersis SA ADR (ENI): 2.39%
  4. Siemens AG ADR (SI): 2.38%
  5. Eaton Corp (ETN): 2.37%
  6. Koninklijke Philips Electronics NV ADR (PHG): 2.37%
  7. Energy Company of Minas Gerais ADR (CIG): 2.36%
  8. General Cable Corporation (BGC): 2.34%
  9. Johnson Controls Inc (JCI): 2.33%
  10. Cooper Industries PLC. (CBE): 2.32%

 

#3: Market Vectors Global Alternative Energy ETF (GEX)

GEX tracks the Ardour Global Index which follows global companies principally involved in the alternative energy business. The index is a rules-based, float adjusted index. The fund was launched May 2007. The expense ratio is .62%. AUM is over $65M and average daily trading volume exceeds 31K shares. As of late November 2011, the annual dividend yield was 1.68% and YTD return of -44.80%.

GEX Top Ten Holdings & Weightings

Data as of November, 2011
  1. Kurita Water Industries Ltd. (KTWIF): 7.72%
  2. Enel Green Power S.p.A. (EGPW): 7.58%
  3. Vestas Wind Systems A/S (VWS): 7.57%
  4. First Solar, Inc. (FSLR): 7.33%
  5. Cree, Inc. (CREE): 6.14%
  6. Polypore International, Inc. (PPO): 5.38%
  7. Verbund AG (VER): 5.29%
  8. Covanta Holding Corporation (CVA): 4.47%
  9. Cosan Ltd (CZZ): 4.19%
  10. China Longyuan Power Group Corp Ltd. (CLPXF): 4.06%

#4: PowerShares Global Clean Energy ETF (PBD)

PBD follows the WilderHill Global Innovation Index which is distinguished marginally by an exposure to companies with technologies facilitating cleaner energy. The fund was launched June 2007. The expense ratio is .75%. AUM equal $105M and average daily trading volume is around 42K shares. As of late November 2011 the annual dividend yield was 1.05% and YTD return of -43.10%.


PBD Top Ten Holdings & Weightings

Data as of November, 2011
  1. Meyer Burger Technology AG (MBTN): 1.89%
  2. China Longyuan Power Group Corp Ltd. (CLPXF): 1.83%
  3. GCL-Poly Energy Holdings Limited (03800): 1.83%
  4. SolarWorld AG (SWV): 1.81%
  5. Huaneng Renewables Corporation Ltd (00958): 1.81%
  6. Gamesa Corporacion Tecnologica, S.A. (GAM): 1.76%
  7. GT Advanced Technologies Inc (GTAT): 1.76%
  8. SunPower Corporation (SPWRA): 1.76%
  9. Vestas Wind Systems A/S (VWS): 1.73%
  10. Yingli Green Energy Holding Company, Ltd. (YGE): 1.71%

#5: iShares S&P Global Clean Energy Index Fund (ICLN)

ICLN tracks the S&P Global Clean Energy Index. The fund was launched in June 2008. The expense ratio is .48%. AUM exceeds $35M and average daily trading volume is 28K shares. As of late November 2011 the annual dividend yield was 2.38% with a YTD return of -44.39%.

ICLN Top Ten Holdings & Weightings

Data as of November, 2011
  1. Energy Company of Minas Gerais ADR (CIG): 5.42%
  2. GCL-Poly Energy Holdings Limited (03800): 5.41%
  3. National Electricity Company of Chile, Inc. ADR (EOC): 5.37%
  4. Energy Company of Parana ADR (ELP): 5.08%
  5. China Longyuan Power Group Corp Ltd. (CLPXF): 5.04%
  6. Hokuriku Electric Power Co Common Stock: 4.81%
  7. Enel Green Power S.p.A. (EGPW): 4.74%
  8. Kyushu Electric Power Co Inc Common Stock: 4.73%
  9. Verbund AG (VER): 4.71%
  10. EDP Renovaveis SA (EDPR): 4.64%

 #6: Guggenheim Solar ETF (TAN)

TAN follows the MAC Global Solar Energy Index which has a more global focus. It's constructed with constituents including ADRs, in all phases of the solar industry from developers, module manufacturers, marketing, selling and financing. The fund was launched April 2008. The expense ratio is .65%. AUM is roughly $63M and average daily volume is over 470K shares.  Through late November, 2011 the annual dividend yield was 1.08.14% with a YTD return at -62.60%.

TAN Top Ten Holdings & Weightings

Data as of November, 2011
  1. GCL-Poly Energy Holdings Limited (03800): 11.09%
  2. First Solar, Inc. (FSLR): 10.35%
  3. Meyer Burger Technology AG (MBTN): 6.65%
  4. GT Advanced Technologies Inc (GTAT): 6.25%
  5. MEMC Electronic Materials Inc (WFR): 5.33%
  6. Trina Solar Limited ADR (TSL): 4.42%
  7. SMA Solar Technology AG (S92): 4.05%
  8. Yingli Green Energy Holding Company, Ltd. (YGE): 3.82%
  9. Renewable Energy Corporation ASA (REC): 3.71%
  10. SolarWorld AG (SWV): 3.58%


#7: First Trust ISE Global Wind Energy ETF (FAN)

FAN follows the ISE Global Wind Energy Index which consists of companies exclusively involved in the wind energy business account for a 66% index weight. The fund was launched in June 2008. The expense ratio is .60%. AUM equals $40M with average daily trading volume of 29K shares. As of late November 2011 the annual dividend yield was roughly .74% and YTD return of -26.10%.

FAN Top Ten Holdings & Weightings

Data as of November, 2011
  1. Hansen Transmissions International NV (HSN): 9.12%
  2. EDP Renovaveis SA (EDPR): 8.01%
  3. REpower Systems AG (RPW): 7.67%
  4. Iberdrola SA (IBE): 7.61%
  5. China Longyuan Power Group Corp Ltd. (CLPXF): 6.42%
  6. Vestas Wind Systems A/S (VWS): 5.56%
  7. Gamesa Corporacion Tecnologica, S.A. (GAM): 3.90%
  8. Nordex AG (NDX1): 3.19%
  9. China WindPower Group Ltd. (CWPWF): 3.10%
  10. Infigen Energy (IFN): 2.42%

#8: Market Vectors Solar Energy ETF (KWT)

KWT follows the Ardour Solar Energy Index includes publicly traded companies globally that derive two-thirds of their revenue from solar power and related products. Weighted companies receive 90% of their revenues in this manner. The fund was launched April 2008. The expense ratio is .65%. AUM are over $10M and average daily trading volume is around 39K shares. As of late November 2011 the annual dividend yield was $1.71 and YTD return was -65.00%. (Note: Most ETFs need to have AUM over $25M to be considered a success. Most losses of AUM are due to market conditions but that doesn't mean the ETF can survive in this condition  and not be folded in with another issue for example or even cease to exist.)

KWT Top Ten Holdings & Weightings

Data as of November, 2011
  1. MEMC Electronic Materials Inc (WFR): 11.53%
  2. First Solar, Inc. (FSLR): 10.74%
  3. GT Advanced Technologies Inc (GTAT): 9.25%
  4. SMA Solar Technology AG (S92): 5.73%
  5. Gintech Energy Corporation (3514): 5.65%
  6. STR Holdings, Inc. (STRI): 4.18%
  7. SolarWorld AG (SWV): 4.09%
  8. Neo Solar Power Corp. (3576): 4.04%
  9. Yingli Green Energy Holding Company, Ltd. (YGE): 3.97%
  10. Trina Solar Limited ADR (TSL): 3.56%

#9: PowerShares Global Wind Energy ETF (PWND)

PWND follows the NASDAQ OMX Clean Edge Global Wind Energy Index which is a lot of words to say "wind ETF". The fund was launched July 2008. The expense ratio is .75%. AUM is just shy of $16M which is again below the threshold for reasonable issue success. Average daily trading volume is just under 10K shares. As of late November 2011 the annual dividend yield was .25% and YTD return -33.00%.

PWND Top Ten Holdings & Weightings

Data as of November, 2011
  1. Enel Green Power S.p.A. (EGPW): 11.32%
  2. China Longyuan Power Group Corp Ltd. (CLPXF): 11.22%
  3. EDP Renovaveis SA (EDPR): 10.05%
  4. Vestas Wind Systems A/S (VWS): 9.62%
  5. Hansen Transmissions International NV (HSN): 4.42%
  6. REpower Systems AG (RPW): 4.26%
  7. Innergex Renewable Energy, Inc. (INE): 4.16%
  8. China WindPower Group Ltd. (CWPWF): 3.88%
  9. Gamesa Corporacion Tecnologica, S.A. (GAM): 3.81%
  10. Huaneng Renewables Corporation Ltd (00958): 3.74%

#10: Market Vectors Uranium + Nuclear Energy ETF (NLR)

NLR follows the DAXglobal Nuclear Energy Index. The fund was launched August 2007. The expense ratio is .57%. AUM are now $107M and average daily trading volume at 36K shares""both less than half the levels from June. As of late November 2011 the annual dividend is $1.06 making the yield 6.44% which is the highest in the space and YTD return was -35.50%. Japan's Fukushima plant disaster has hit the sector hard. Investors should remember while new nuclear plants will be difficult to permit ongoing servicing and construction of new plants will continue albeit with the latter at slower pace. Political risks are high in the sector and the attraction of the dividend yield may mislead as some companies "may" reduce these given the business slowdown.

NLR Top Ten Holdings & Weightings

Data as of November 2011
  1. Electricité de France S.A. (EDF): 9.31%
  2. Exelon Corp (EXC): 8.28%
  3. Areva (AREVA): 8.16%
  4. Mitsubishi Heavy Industries, Ltd. (7011): 8.13%
  5. Constellation Energy Group Inc (CEG): 5.47%
  6. Cameco Corp (CCJ): 5.33%
  7. Central Vermont Public Service Corporation (CV): 5.23%
  8. Kajima (1812): 4.57%
  9. Hathor Exploration Ltd. (HTHXF): 4.53%
  10. JGC Corp. (1963): 4.42%

 

Again, given nuclear disasters, politics and incoherent or effective energy policies risks within this sector remain high.

As with any ETF sector remember the business interest of sponsors aren't necessarily aligned with your investment interests and objectives. Always keep this in mind.

New ETFs from highly regarded and substantial new providers are also being issued. These may include Charles Schwab's ETFs and Scottrade's Focus Shares which both are issuing new ETFs with low expense ratios and commission free trading at their respective firms. These may also become popular as they become seasoned. 

For further information about portfolio structures using technical indicators like DeMark and other indicators, take a free 14-day trial at ETF Digest . Follow us on Twitter and Facebook as well and join our group conversations.

You may address any feedback to: feedback@etfdigest.com   

The ETF Digest has no current positions in the featured ETFs.

(Source for data is from ETF sponsors and various ETF data providers)

 

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Dave Fry is founder and publisher of ETF Digest, Dave's Daily blog and the best-selling book author of Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management, published by Wiley Finance in 2008. A detailed bio is here: Dave Fry.

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