China loves to adopt renewable energy, whether it is water, wind or some other alternative method. That being said, there are two ETFs investors can play that should help enhance any portfolio. These ETFs are for the investor who may like to be a bit aggressive and is looking to capitalize on the alternative energy craze taking place in China. My outlook on both ETFs is to proceed with caution; however minor changes in both could certainly make them more attractive to investors.
Power Shares Global Clean Energy (PBD) - The ETF invests 90% of its assets in the securities of companies engaging in the advancement of clean energy and cleaner energy based alternatives. The PBD portfolio includes mainly ADRs and GDRs and has returned 1.76% year to date, which is an improvement considering it has lost 45.24% over the last year and 13.47% over the last three years.
Investors should remain cautious when it comes to PBD. Even though the fund yields roughly 1.74% ($0.13), it may actually experience more movement toward the downside in the short term, before it begins to turn itself around. In my opinion the fund needs to reduce its position in LSB Industries (LXU) and obtain a moderate position in the Direxion Daily Emerging Markets Bull 3X Shares Fund (EDC). EDC has returned 31.19% year to date versus LXU, which has returned 15.3%, and recently experienced an explosion at its Arkansas-based plant that could damage the stock further.
First Trust Global Wind Energy (FAN) - The ETF's behavior correlates directly with the performance of the ISE Global Wind Energy Index, and invests 90% of its assets in the common stocks within the index or ADRs representing securities within the index. The fund has actually posted a year-to-date loss of 1.14%, which is an improvement over the 33.61% loss it posted throughout the last year and the 8.51% loss it posted over the last three years.
Cautious yet improving is my take for investors who may be interested in FAN. The performance over the last few months has been improving even though fund managers should realign their positions in order to make the ETF more attractive. Positions in both Guess Inc. (GES) and Alpine Global Premier Properties (AWP) both yield nicely, however stock performance has been lagging over the last 12 months, dragging the performance of ETF downward.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
