Wind, Natural Gas ETFs: Oil Man Pickens Thinks You'll Make Money 15 comments
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An American legend in the oil industry believes we can't wait a minute longer to get off our foreign oil dependency. And he has a plan.
In essence, it's a two-pronged approach. First, replace/retrofit/create cars and trucks to run on natural gas. Second, use American "wind tech" superiority as our dominant alternative energy resource for the future.
Pickens is one of the 100 wealthiest men in the world. And he's going to become even wealthier if we "purchase" the Pickens Plan hook, sinker and line.
But if a thrice billionaire gets wealthier... do we really care? Many facts are indeed the facts.
For instance, we are 70% dependent on foreign oil. And it's a matter of national security to stop the transfer of our wealth to those of oil producing nations. (Not to mention a matter of maintaining the lifestyles that we've pursued.)
Second, natural gas is the easiest, quickest and fastest way to wean ourselves off foreign oil. It does not mean that we shouldn't drill.... it just means that "nat" gas (abundant domestically) is one of the cleanest, most fuel efficient, most cost efficient ways to reduce pain at the so-called pump.
Third, energy independence is arguably the most critical issue for the United States. Politicians talk in generalities about things like health care, education, the war abroad, homeland security, mortgages, housing and the economy. And yes... ALL of the issues are pertinent.
If we can dispense with the empty promises long enough, we might actually recognize that "energy independence" is possibly "the priority." We won't be in a position to address health care, education or homeland security if we do not change America's energy infrastructure.
Okay... so let me get off my soapbox here. I don't necessarily agree with Pickens on the specifics of the plan. And I think investors have to think globally such that... they don't ignore the incredible potential for nuclear energy.
Nevertheless, investors do have several opportunities to invest in the companies that specialize in wind and operate in the natural gas segment. Here are 3:
1. First Trust ISE Global Wind Energy ETF (FAN). Many of the companies are truly global, which does intrigue me. There are some 52 companies with a reasonably attractive price-to-sales ratio of 2.3. The median market cap of 1.5 billion makes FAN a mid-cap growth investment. With volume in the 350,000 range, this investment is more than "hot air." (The P/E ratio may be on the high side at roughly 25.)
2. Powershares Global Wind Energy Portfolio (PWND). The volume is a bit lighter here, which may make for a less desirable entry and/or exit point. There are 32 companies across the growth spectrum -- large, medium and small. And the expense ratio of 0.75% seems rather steep. Yet a long-term believer in global companies that manufacture, develop, distribute, install and use energy derived from wind sources would certainly succeed with PWND if wind energy became a mainstay.
3. First Trust ISE-Revere Natural Gas ETF (FCG). This fund tracks an equal-weighted index consisting of companies that derive a substantial portion of their revenue from the exploration and production of natural gas. it's up roughly 28% in 2008 thus far. The P/E has steadily risen from 13 a few months ago to 17 today. Nevertheless, for those who see natural gas in a Pickens-like manner, that would hardly stop you. The 30 companies in the index being tracked include names like Chesapeake (CHK), Comstock (CRK) and Petroquest (PQ).
(Would you like more "alt energy" ideas. Click here.)
Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. 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. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.
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This article has 15 comments:
1. The Pickens plan is a plan, something missing in most places. And the technologies it's based on are readily available.
2. Wind energy where it exists costs about $0.12/kWhr or less so is currently viable. While solar PV has potential, its cost is around $0.22/kWhr so I don't understand the shortage for the ongoing world wide build out. Seems PV is too costly to justify the extent of its build out.
3. Energy independence probably isn't anymore a necessity than independence of anything else in the world, but increasing supply by equitable means empowers those participating. Increasing demand usually means increasing productivity, meeting that demand with more stable alternatives does not squeeze progress against an unsustainable future (headlines of $200 oil, etc.)
4. The Pickens plan is not mutually exclusive of other options. Nuke plants can be built where they can, coal use can be improved, solar PV can continue down its path, Solar heat to elec. and hot water will offer immediate bennefits. Other renewables, more oil,....
5. Conservation by lifestyle and technology are moving forward.
6. Natural gas transportation will work for some, others will be better served by electric. The Pickens Plan makes both more viable without needing a centralized plan to distribute the benefits. Both will benefit gasoline users slower to convert.
7. The Pickens Plan takes 5 minutes to explain, uses available technology, produces alternatives with viable economies, distributes benefits to manufacturers, financers, contractors, land owners, other? over nearly 1/3 the U.S. Especially nice to see such a widely beneficial approach.
8. Important step could be to get the auto industry more ready for electric cars.
9. I think a convincing plan to challenge the perception of inadequate future oil supplies will be part of quick oil price relief.
You and Boone are on the same page, actually, about our dire need to develop additional domestic oil and gas resources NOW. He told a Senate committee last week of the vital importance to explore in ANWR.
His ideas make alot of sense, actually. He likes wind because it's cheap and it's the ONE resource we can permit expeditiously. As you know, the other part of his plan would be to take the NG we save from the electric grid by substituting wind energy and use it to power our EXISTING vehicle fleet. (The NG conversion is only a few hundred dollars per car, but the problem is a lack of fueling stations. Incidentally, I'm told they have such an infrastructure in Utah, where the public fills up for the equivalent of $2 a gallon today.
In related news, I saw a fascinating presentation by Rep. Steve King from Iowa on the House floor on C-Span last night. To say the least, he doesn't think much of environmentalists. He said there are all these so-called Green geniuses from places like Berkeley and Cornell telling the Democrats what to do about energy, and they only ever come up with "half a plan." They know all about renewables, but they haven't a clue about what to do to enable our economy to survive our present shortage of oil and gas.
Indeed, some economists are forecasting a return to gas lines soon. While that would be terrible for our economy, it would have one salutary benefit: IT WOULD RID US OF THE BOTH THE GREENS AND LIKE MINDED DEMOCRATS IN ONE AFTERNOON!
> jack
You would think even the Greens could connect the dots on this one. Their home state of CA is already experiencing periodic brownouts, and they have emergency plans in place for what to do when large parts of the grid go down simultaneously. They also fail to consider that the plans, permits and lawsuits (...by their friends) involved would take longer than getting oil from ANWR.
This is EXACTLY the "half a plan" idea that Rep. King was referring to in his presentation on the House floor last night. The Greens continually spout all this nonsense about energy, but it doesn't do us a bit of good where the rubber meets the road at the gas pump.
The idea of NG cars may have more merit than you may think. Picken's company picks up trash in San Diego right now with NG powered trash trucks. I rode in NG taxicabs in Las Vegas 25 years ago.
The problem isn't safety, then, it's the availability of gas stations. Utah had the foresight to mandate them. Here in Louisiana the oil companies were seriously considering this idea two decades ago, but their plans were shelved during one of our periodic oil busts.
I'm originally from your part of the country, and traveled through the Harbor Tunnel dozens of times. Do you know if their ban on transporting compressed flammable gases extends to NG in RV's...?
Stop acting like Politicians and just get behind it, all the "Bugs" are killable in short order.
People that love trees so much that they pass laws forbidding cutting them, even around your house, on your own property, and thereby suffer burning down the trees and the houses every few years I don't want to hear from.
The Politicians that are waiting for bids from the Lobbyists--(like corn farmers)--Academics that only understand energy in a blackboard formula, and other assorted room temperature IQ's, please step back out of the way. You've had since 1973 to solve this problem--now that the "Crisis" results are in, let's let the individuals try--Like "the Pick" who understand the problem--and the solution.
And the stupid, spiteful, foot dragging Permit withholding will not be tolerated. No studies, No Birds, No BS!!
Bravo!
Amen, Precisely!! Add "equitable" to your "faster method of energy generation" and you've hit the bullseye.
I can't speak for migratory bird issues but wind turbines killing birds is either out of date or urban legend. My experience and the statistics say other common things kill more: buildings, chimneys, cars, etc.
I guess beauty is in the eye of the beholder but my neighbors like my 1 kW turbine on 17 feet tower. I like the industrial ones along the highway and even living on the Rocky Mountain front I have never heard a local say they found any size a menace to the environment. Generally, enthusiasm for the days they run best! It's science and progress in motion.
Wind is so equitable I don't think Pickens is really scheduling around subsidy issues either.