Look What's Blowin' In: The New Wind ETFs

Are you interested in wind energy, but don't have billions to invest like T. Boone Pickens? Are you afraid that you are going to pick the next pets.com, and not ebay.com? Don't fear. IndexUniverse.com is reporting that the PowerShares Nasdaq OMX Clean Edge Global Wind Energy Index (ticker: PWND - prospectus) is expected to begin trading next week.

It is actually not the first wind ETF. A few weeks ago, the First Trust ISE Global Wind Energy Index Fund (ticker: FAN - prospectus) hit the market. The PWND ETF will begin with 31 companies in its portfolio. The FAN ETF currently has 67 companies. Both have a high level of global diversification, which makes sense, given that I am not sure how they could even find 31 companies in the U.S., let along 67, with a significant exposure to wind energy. As a result of reaching out to global players, PWND is able to list that 90% of its companies are pure-plays. FAN has about 66% pure-plays. What is a pure-play? As defined, most of the business in the company must comes directly from wind energy - or specifically, the company must either produce 1,000 megawatts of energy, or generate $1 billion a year from wind-related power. Non-pure-plays include companies such as General Electric and Siemens, each which have significant interest in wind energy, but for which wind is still a relatively small profit center when compared to other business operations.

In addition to capitalization requirements and weighting rules, the funds also differ in the way they pick their companies. PWND uses a quantitative-based system, while FAN uses more fundamental analysis. Since the methodologies used by each are different, both are expected to deliver similar, albeit different returns. Given that wind energy has been growing at almost 30% per year globally, and crude oil and natural gas are continuing to trade at high levels, wind energy should continue to generate interest and electricity as countries going green begin using less coal to fuel their power plants. Nonetheless, if tax breaks expire, and crude oil and natural gas come back to "normal" levels, interest in wind energy could fall back a little, adding some potential volatility to returns.

Given the global nature of the funds, and that the industry is just beginning to gain exposure, many of the pure-play wind companies are not well-known. For the FAN ETF, major holdings greater than 5% include Vestas Wind Systems [CO:VWS], Repower Systems, Gamesa Corp Tecnologica SA (GCTAF.PK), and Hansen Transmission International NV. Given that the PWND ETF follows the Nasdaq OMX Clean Edge Global Wind Energy Index, major components can be found here. The top five holdings greater than 1% include Zoltek Companies (ZOLT), American Superconductor Corporation (AMSC), KHD Humboldt Wedag International, General Electric (GE), and FPL Group, Inc. (FPL). Other U.S. listed companies in the FAN include AES Corp. (AES) and Xcel Energy (XEL).

Comments

[aquaculture:]

News today: "survey says Denmark happiest country in the world"

Its now official: more windmills make you happy.
disclosure: long (VWS)

2008 Jul 01 03:29 PM

[22thoroughbred:]

This ETF is gonna blow

2008 Jul 02 03:45 AM

[Learning Curve:]

What's not to be happy? A beautifully balanced, egalitarian society that enjoys sensible solutions to problems and has those delicious long summer days.
(How Danes feel in the winter may be another matter.)
Personally, I've seen nothing more hopeful and harmonious than a spread of wind energy fans whether they be in Europe or California.

2008 Jul 03 12:04 PM

[thku4grace:]

Denmark isn't quite so happy anymore. Large increase of Muslims have left the country with terrorist fear. Always had freedom of speech and the press but now finding they can not critique Muslim life, Middle eastern countries, other than Israel of course, and no cartoons of Mohammed.

2008 Jul 18 03:50 PM

[proud american:]

Every American should go to Denmark at least once. As a light skinned African American whom visited there several times for work, at first I felt like I was in the south during the 50's/60's. After people realized I was American and was open & willing to learn thier culture, I was treated well by many!
I was fortunate to learn the Danes deep history and culture while travelling to various areas and historal artifacts. It's a beautiful country! My travels provided me a real opportunity to understand why many Danes come across as proud and stubborn to many in the US as they have a long history which they are trying to protect while we as Americans do not seem to care about our short history. These days most Americans seem to look forward to the 4th of July and other National Holidays as a time to take-off from our hustle & bustle lifestyles and care less about their true meaning.
We should highly consider closing our borders from thier lessons learned. Once they adopted our western ways, the flood gates opened and Muslims arrived to take advantage of thier system. DK tends to focus on thier own people and to preserve what they have.
Although I'm a proud American and will defend it agianst freind/foe and die for every American (including our Racist and anti-war activist), I'm somewhat ashamed of the way we conduct our lives (at times) and hope someday we can learn from other proud nations (such DK). Instead we seem to focus on today, Hollywood, and the negative areas of our lives versus getting off our butts and doing something to improve and protect what we have and those that have given their lives to defend our freedom...shame on us! I feel sorry for Danes unable to speak out...this has been going on for a long time in our country. They made the mistake of trying to adopt our western ways...and look where it got them!
Sad! Soon they will be unable to properly parent thier children anymore....

2008 Jul 22 07:13 AM

[FWallace:]

Is there any place on Earth that Muslims have not migrated ???

2008 Jul 23 07:25 AM

[Tombstone:]

muslims average 18 children per couple. we and most other western countries average about 2 (two). it is their avowed intention to immigrate into western nations and gain power within a few generations by simply birthing more babies than we. with virtually unfettered infiltration and a 9 to 1 reproduction ratio i speculate that your female grandchildren will be wearing headscarves and males reading the koran. moreover, i believe we already have the first muslim US president whose intention is to bring our nation to its knees. he is accomplishing this by utilizing financial and political weapons rather than guns and bombs. with taxes and inflation about to skyrocket and the fed govt pushing us into socialism, we may be witnessing the end of America as we knew it last year. short question-long answer. sorry!


On 2008 Jul 23 07:25 AM FWallace wrote:

> Is there any place on Earth that Muslims have not migrated ???

May 28 01:17 PM