Alt Energy ETFs: Lean, Green and Clean

With oil in the $90s, many investors are asking me to talk about alternative energy. Sometimes, people request that I write about wind, solar or "electric" opportunities. Others just ask for a recommendation on the biggest, baddest, "greenest" corporation on the NYSE or NASDAQ.

Yet the largest companies are not "largely" responsible for the future of energy resources. It is the smaller and mid-sized companies that are actually forging new ground in cleaner exploration and greener choices. What's more, many of the brightest bulbs are headquartered in foreign countries.

For example, the PowerShares Global Clean Energy Fund (PBD) is made up of small- and mid-sized growth-oriented corporations. Each focuses on renewable sources of energy and/or technologies that will facilitate cleaner energy.

PBD may be limited to clean and green, but it is not geographically constrained. It is diversified clear across the globe.

Granted, a P/E of 40+ may make you wince at first glance. That said, the return on equity is a respectable 13.5% and there isn't a better alternative for "alt energy" on the global ETF plane.

Whereas the PowerShares Global Clean Energy Fund is all about cleaner and greener, there's one exchange-traded fund that's dedicated to the improvement/enhancement of existing energy technologies. The WilderHill Progressive Energy Fund (PUW) tracks a group of companies that work towards transitional solutions; that is, these are companies working towards "leanness" and greater efficiency in the use of fossil fuels.

PUW is a mixture of long-standing companies and newbies to the field. Still, as much as 80% of the allocation is to small- and mid-cap listings.

And while I didn't mention it in the title, one source of energy still has a future... both in the United States and around the world; specifically, nuclear energy still accounts for 20% of U.S. electricity, while other countries seek new plants for their own purposes.

Granted, nuclear energy tends to conjure up images of Chernobyl and/or even 3 Mile Island. Yet the taboo topic hasn't prevented old and new corporations from increasing their exposure.

In fact, there are quite a few profitable companies in uranium mining and plant infrastructure. The Market Vectors Global Nuclear Energy Fund (NLR) is weighted equally across large, medium and small sized participants. Moreover, the exchange-traded fund has garnered a great deal of interest out of the gate.

Disclosure Statement: Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above.

Comments

[Investor Eric:]

PBD looks like an interesting ETF to check into more, I like that no one stock is more than 5.00% of the overall holding and that is First Solar(FSLR). It seems that the ETF is more heavily solar-based which is a plus in my book, wind has some good opportunities, but advances in solar seem like a much more feasible energy-solution short-term.

As much as nuclear has shaken it's "three-mile/NIMBY" bias lately and with the pebble-bed advancements it looks attractive as an investment, the reality is that it will be almost a decade before any of those reactors could come online and be a feasible alternative.

Nuclear is a possible great investment for someone on a long(20-30 years) investment timeline especially to be in on the groundfloor. But as we all know most people are too impatient for positive returns to invest heavily longterm.

But for PBW and PUW the rising oil prices will only make the underlying companies more attractive to investors and hopefully bring in more government subsidies into R&D.

2007 Nov 14 11:08 PM