Not All Is Green in Alt. Energy ETF Land

By Murray Coleman

No matter what you call it—clean technologies or alternative energy—ETFs are flocking to the market. Apparently, so are venture capitalists.

In a new report released by Dow Jones VentureSource, VC capitalists last year plowed a record $3 billion into alternative energy businesses. The number of deals shot up to 221 in 2007.

And most of those are with companies in the product development stage.

While the vast majority were in the U.S., Europe saw a fair amount of activity. China's VC-reach actually fell, though.

What's this mean to investors? Probably nothing right now. Green is everywhere and it's not surprising the venture vultures are circling. But how much should it make up of your portfolio? Perhaps a better question is whether so-called green ETFs even need to be in your allocation.

They're certainly not for those with weak stomachs. Look at PowerShares WilderHill Clean Energy (AMEX: PBW). After gaining nearly 60% last year, it's down more than 23% in 2008. But energy as a whole is down pretty significantly this year.

So let's be fair. What's being called alternative energy covers a lot of ground. Take, for example, First Trust ISE Water (NYSE: FIW). It's down this year, but not out. Although FIW has lost a bit more than 4% so far, that's still more than two full percentage points from the broader stock market.

A leading performer this year in its portfolio is a Latin American sanitation provider. Flowserve Corp. (FLS) is up 15% and some change, and Lindsay Manufacturing (LNN) has gained 13%-plus.

The top holdings for PBW include Cree Inc. (CREE) and Applied Materials. (AMAT) Both are up by double digits this year. But aren't those computer manufacturers? I guess they're going green ... which begs the question, if everyone's going that way, why not wait until really big established names get into the field? Won't they basically buy up all of the smaller competitors?

Comments

[Lost it at ...:]

Cree and Applied Materials are computer manufacturers? [Comment edited for abusive language. Commenter put on notice]

2008 Mar 02 08:35 AM

[what_tha_fact?:]

As I type on my Cree laptop...not. Who's turn was it to supervise Murray today?

2008 Mar 02 09:55 AM

[bgdreamz:]

Is he saying that Floserve went from making pumps and valves in Texas to providing sanitation in Latin America? Guess I'll look that up on my AMAT 2000 after I go buy some green paint to paint my car. I hear green cars are gonna be the rage soon....

2008 Mar 02 10:22 AM

[bgdreamz:]

Guess I'll look that up on my AMAT 2000 when I get back from buying some green paint for my car. I hear green cars are gonna be the rage soon...

2008 Mar 02 10:37 AM

[browser:]

Uh, dude!!! You need to write about things you are knowledgeable about. This subject isn't one of them! CREE will be a major player in alternative energy in the future. Google it and find out why. You might learn something! In the meantime, STOP writing and read about some of these companies BEFORE you publish an opinion on them!

2008 Mar 02 11:12 AM

[CrossProfit:]

Companies that are in multiple sectors are classified according to the sector that provides the largest part of their revenue. For instance, IBM is still classified as 'computer hardware' even though some think it should be classified as 'computer software and services'. Classification is determined by revenue and not profits or a combination of the two.

Another example is Apple (AAPL). Classified 'computer hardware' as this is the most important revenue component. Though AAPL dropped the word 'computer' from its name and the iPod and iPhone are better known and sell more units than the computers division, total revenue is less.

Another example is Elbit Medical Imaging (EMITF). Until GE bought segments of the business Elbit was classified 'health care'. Though Elbit still dribbles in 'health care', it is now classified as 'real estate' as the majority of revenue is from shopping malls in India (not even Israel!).

See CREE classification here:
www.crossprofit.com/vi...

See AMAT classification here:
www.crossprofit.com/vi...

Maybe one day CREE and AMAT will be 'computer hardware', but not today.

CrossProfit

2008 Mar 02 12:52 PM

[keanemd:]

By big players, do you mean GE, Goldman Sachs, or maybe Google?

2008 Mar 02 04:32 PM

[tessant:]

once again, the readers of seeking alpha are more knowledgeable than the writers. someone has to filter this stuff, its unreal what is published.

scott
growthportfolio.ning.c...

2008 Mar 02 05:33 PM

[Lost it at ...:]

Quick note> Saying Murray isn't "knowledgeable," telling him to "learn something," or asking "who's watching Murray today?" are all OK. But apparently it's not OK to say he's an idiot. That's "abusive."

2008 Mar 02 05:38 PM

[Mr. G:]

Considering the future growth potential of the green energies, mere profit taking considering the rest of the market, is a bump on an uphill road.

2008 Mar 03 10:09 AM

[Murray Coleman:]

Hi, everyone ... sorry to offend. I started my career as a tech writer and understand the development and history of both Cree and Applied Materials ... I apologize for broadly casting these two as computer manufacturers rather than a semiconductor manufacturer and a test equipment maker (I know, chips and nano). It wasn't correct, but my point was that these companies are extremely broad-based ... the suggestion is that these indexes that are trying to create new green sectors leave a lot of room for question.
And I wasn't making a statement as much as asking a question. It's one that I keep hearing in many circles.
Oh, and I agree with all of you who think I'm an idiot. There's no debate along that score. That's one reason why I read Seeking Alpha and enjoy learning from its readers and contributors. Good catch and please don't give up on me yet!
-- Murray Coleman

2008 Mar 03 09:50 PM

[Mr. Wynn:]

Cree's whole business today is pointed towards LED lighting. Take a look at their website. Yes, they make chips, LED chips to be precise, but they are the largest LED lighting manufacturers in the world if I'm not mistaken. They are in the forefront of the next big change in environmental lighting, will it be compact flourescents or Light Emitting Diodes? I'm going with LED lighting. It still needs to produce more candlepower for some situations, etc., but for lower light environments it can't be beat. And the cell phone you're holding is backlit probably with a Cree LED chip. As the backlighting in your car's dashboard instrument cluster probably is, too. This company's going to be the major producer of most if not all of the lighting solutions for at least the first fifty years of this century.

2008 Mar 13 07:32 PM

[browser:]

And have you noticed all the tail lights of the newer cars, trucks, and SUVs? All LED now.... That's CREE and that's why you have CREE all wrong, Murray. And you should continue to READ Seeking Alpha and NOT write an article on it...

2008 Mar 16 04:13 PM

[talroze:]

Actually, it isn't Cree's LED chips in all those tail lights. Cree specializes in blue and white LEDs (rivals Osram and Philips Lumileds make most of the red/orange/yellow ones). And you won't see many of those white LEDs in headlights (just) yet - unless you have a brand new Audi R8 with that option. Where Cree chips do appear a lot is in phone, PDA and laptop PC backlights and - this is the major point - increasingly in general lighting (i.e. replacing incandescent bulbs). But the latter is very much a long-term play (I'm talking 2013-2015 before it gets really big), so hold on in there.

2008 Mar 19 07:46 AM

[Tao:]

You guys pouncing on the writer reminds me of what my mother used to quote:

He who knows not and knows that he knows not can learn, teach him.

He who knows not and knows not that he knows not is a fool, shun him.

He who knows and knows he knows is wise, follow him.

The writer of the article asked if they were and didn't state that they were computer manufacturers.

I like his writing and hopes he writes more.

2008 Apr 02 10:45 AM

[frflyer:]

I just went to Cree's website and it looks like they are moving rapidly into general lighting with their LEDs. And colors are not limited, in fact LEDs can provide all kinds of colors. Their lamps have the warmth of tone of incandescents without the heat or glare.

off topic
Tao your mother must be related to Lao Tzu, who you are quoting. The most wisdom in the fewest words ever written, IMO. I'm referring to the Tao te Ching of course. Good choice to quote from.

2008 Apr 03 12:25 PM