By Roger Choudhury
Face it, there are not infinite amounts of oil out there, and the U.S. consumes more oil proportionately than any other country in the world. The country also has a problem with dependence on foreign oil. Politicians have talked for several decades already to wean the U.S. off of this.
Alternative energy sources have become popular as of late. Development and wide use may take a few more years, so now is the right time to invest in companies that specialize in alternative energy. To diversify your risks by investing in several companies, here are some exchange-traded funds built by financial professionals:
First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) is up 6% year-to-date. It is composed of 50 companies, and the top five holdings are First Solar (FSLR), Linear Technology (LLTC), ON Semiconductor (ONNN), Cree (CREE) and MEMC Electronic Materials (WFR). The sector breakdown is basic materials (1.04%), consumer goods (2.99%), industrials (25.15%), oil and gas (27.76%), technology (41.50%) and utilities (1.56%). The NAV is $17.35, and the fund has $39.9 million in assets. The net expense ratio is a low 0.6%. The fund was formed in February 2007.
PowerShares Global Clean Energy Portfolio (PBD) is up 4.4%, YTD. It is based on the WilderHill New Energy Global Innovation Index (NEX). The top five holdings are Universal Display (PANL), Enel Green Power (EGPW), Amyris (AMRS), Verbund (OTCPK:OEZVY) and GCL-Poly Energy (3GY.F). Ninety-eight companies make up the fund, and the sector allocations are consumer discretionary (4.52%), consumer staples (2.81%), energy (3.33%), industrials (46.25%), information technology (18.26%), materials (5.13%) and utilities (19.69%). The NAV is $14.59 with a market value of $150.7 million. The expense ratio of 0.75%. The fund was first traded on June 13, 2007.
PowerShares Clean Energy Portfolio (PBW) is up 4.6%, YTD. It is based on the WilderHill Clean Energy Index (ECO). The top five holdings are Polypore (PPO), ReneSola (SOL), MEMC Electronic Materials (WFR), Universal Display (PANL) and SunPower (SPWRA). Fifty-seven companies make up the fund, and they are from the following sectors: consumer discretionary (5.94%), consumer staples (1.59%), energy (2.13%), industrials (42.65%), informational technology (27.46%), materials (13.23%) and utilities (7.00%). The NAV is $10.88. The fund size is $561 million. The expense ratio is 0.70%. The fund has been around since March 2005.
iShares Global Clean Energy Index Fund (ICLN) is down 2.6%, year-to-date. The top 5 of its 31 holdings are First Solar (FSLR), Iberdrola Renovables (OTC:IRVSF), Trina Solar (TSL), Companhia Paranaense de Energia (ELP) and Verbund (OTCPK:OEZVY). The breakdown is as follows: semiconductors (47.51%), independent power producers and energy traders (21.47%), electric utilities (14.52%), electrical equipment (12.73%), commercial services and supplies (3.57%), S-T Securities (0.17%), and other (0.04%). The NAV is $17.33 with $58.9 million in net assets. The expense ratio is 0.48%. Inception date of the fund is June 24, 2008.
Market Vectors Global Alternative Energy ETF (GEX) is up 5.6%, year-to-date. The ETF seeks to replicate the Ardour Global Index (AGIXLT). Of the 31 holdings, the top five are First Solar (FSLR), Vestas Wind Systems (OTCPK:VWDRY), Cree (CREE), Enel Green Power (EGPW) and MEMC Electronic Materials (WFR). The breakdown is alternative energy sources (68.8%), environmental efficiency (18.7%), environmental technology (8.0%) and enabling technology (4.5%). The NAV is $21.05, and the fund has $143.3 million in net assets. The net expense ratio is 0.62%. The fund was formed in May 2007.
Market Vectors Uranium+Nuclear Energy ETF (NLR) is up 4.8% since the beginning of the year. It paces the DAXglobal Nuclear Energy Index (DXNE). The total constituents of the fund are 24, and the top five holdings are Cameco (CCJ), Exelon (EXC), Constellation Energy (CEG), EDF (OTC:EDFEF) and Paladin Energy (OTCPK:PALAF). The sector breakdown is uranium mining (39.4%), nuclear generation (24.2%), plant infrastructure (17.4%), nuclear fuel transport (5.6%), nuclear conglomerate (4.6%), uranium enrichment (4.4%) and uranium storage (4.4%). The NAV stands at $26.39 with $293 million in assets under management. The net expense ratio is 0.62%. The fund was formed in August 2007.
Market Vectors also has a Rare Earth/Strategic Metals ETF (REMX). Given China’s slashing of export quotas on earth metals, non-Chinese companies have more opportunities and tremendous growth potential. (For more information, see “Rare Earth Mineral Resource Index Triples in Value Since China's Announcement”.)
Guggenheim Solar ETF (TAN) is up 16.4% since January 3 of this year. It tracks the MAC Global Solar Energy Index (SUNIDX). Thirty-four securities are in the fund, and the top five holdings are First Solar (FSLR), Trina Solar (TSL), Renewable Energy (OTCPK:RNWEY), MEMC Electronic Materials (WFR) and Meyer Burger Technology (OTC:MYBUF). The sector allocations are information technology (85.48%), industrials (10.23%), materials (3.49%) and utilities (0.89%). The NAV is $8.50 with $181.5 million of assets under management. The expense ratio is 0.66%. The inception of the fund was on April 15, 2008.
Given higher oil prices in the short-term as well as the long run, solar-themed companies are more competitive. We searched for the fastest growing solar hardware companies by earnings and revenue growth relative to their peers. (Read “7 Fastest Growing Hardware Names Powered by Solar.")