danno

Ormat Should Benefit from the Ethanol Backlash

I agree that Ormat is a great company and the world leader in geothermal energy. However, I don't see how that is terribly relevant to ethanol since it is used (unwisely as a transportation fuel) while Ormat adresses power generation (electricity, cogeneration, district heating, etc.).

Investing in the Basic Necessities

This is good, point #1 about exposure is particularly good. And yes, a lot of these index funds have investments in a lot of over-hyped and lousy companies. The litany of companies dropped from their indexes each quarter is also telling that many of them (the index managers and the investors themselves) know little about the companies in which they have invested. The former results from incompetence, the latter just from laziness. Do your homework!

Author should look at 2 alternatives:

1 Invest in a composite index in the sector such as those from Ardura or NEF, or
2) Go with an ETF that focuses on picking only the best companies in the sector such as the PowerShares Cleantech Portfolio (PZD) and have high exposure. On the other hand, PZD doesn't provide a pure-play investment in either energy or water. It looks to me more like diversified growth stock mutual fund.

I would differ with the author on one point, however. There is no justification for investing in stocks that are destroying the environment such as coal mining companies. They profit while the public has to absorb the huge negative costs created by coal mining, transportation, and combustion.

The Macroeconomics of Buying Green

I suggest that the author due some homework on the actual indexes not just the packaged product. He's certainly not really getting what he thinks he is and gets extra risk to boot. There are many better products out there than those two. Moreover, the weighting strategy, company selection, and portfolio strategy are highly questionable in those indexes. If one is serious about investing in sector ETFs then do more research on the companies, the index mechanics, past company selection, weighting strategy, etc. You worked hard for your money, it deserves some real effort when you invest it.

The Best Green ETF

I would disagree with the author. Take look at the rubbish in PBD (past and present), the poor weighting strategy, and lack of understanding of Index Management and ETF mechanics (for which hedge funds thank the Index Managers of QCLN and PBW profusely). The indexes from Ardour, Cleantech, and New Energy Finance are far superior products. If you seek PURE alternative energy then Ardour and NEF have indexes that are serious and not gimmick products. The cleantech one is broader play and not focused on solely energy.

Makes me wonder, do investors ever do homework on the Index advisers and not just the ETF. Was it Goethe who said, "God is in the details"? Well that applies pretty well.

Investing in Water and Water ETFs

Well, again what is the Index trying to reflect. If it's the global demand for more water and clean water, then you're not really getting that much exposure, but it's a nice marketing theme.

The phenomenon which the index is trying to reflect is poorly captured. In other words, the index performance will have a sub-par correlation with what it's 'trying' to track.

In addition this ETF grew so fast (nice idea in theory and easily marketable) that its huge growth in in assets drove up many stock prices that invested in. A self-fulfilling prophecy not unlike some of the wilderhill funds (much worse than this one)

Millipore? if you really look close at it's business, it's mostly in filtration for biomed/pharma/semicond... And a lot of what it's filtering isn't water.

Agilent, Emerson? water's a tiny percentage of their businesses. Roper? Maybe one third. Pall? Maybe 20%. Siemens and GE? Tiny.

The Index is nice in theory, but runs out of steam pretty quick.

Moreover, what the heck kind of weighting strategy is being used here? Look at the percentage of the float of some of these companies. Good luck at rebalancing time when Index Advisor has to annouce 5 days in advance what the rebalanced holdings will be. It's a field day for hedge funds and arbs at shareholder expense.

Investing in Water and Water ETFs

John: many are including GE, Veolia, Siemens, etc. but desal requires a lot of energy - which isn't exactly getting cheaper. That's why the much of desal system sales goes to countries where energy is cheap like North Africa and the middle east.

Investing in Water and Water ETFs

my bad, somehow that got mixed up with Franklin Electronic Publishing (FEP), still there are plenty of other questionable stocks in that index.

Investing in Water and Water ETFs

With all due respect, I would recommend that the author spend some time kicking the tires on these ETFs, learning about ETF mechanics, the companies in these ETFs, and in particular, the Index advisors. An investor who has really done his/her homework would never go near PHO (for example). Many of the companies in PHO have little significant business in water (Millipore? Franklin Electric? Agilent? Give me a break). This is no way to play the global thirst for more fresh water and cleaner water.

And water utilities? Good luck for them trying to raise water prices (even when rate increases are sorely needed) - that's been a disaster worldwide with terrible returns on capital. Some of the other companies are just 3rd-rate manufacturers with no pricing power whatsoever getting killed by high metal prices.

And even many of those in the water biz are highly suspect. How much earnings/revenues does GE get from its water biz - 10% max? Why would anyone think that the performance of the GE's water biz be a significant driver of GE's stock price –same for many others like Siemens.

ETFs like PHO are just gimmick products thrown together with to make money, but don’t really follow the purported investment theme. Apparently the $2.1 billion in PHO suggest that the average small investor or retail investment advisor haven’t done enough homework to know that the index manager has little idea what he/she is doing. Many ETFs such as those supposedly investing in “alternative energy’, ‘nanotech’, and ‘water’ sounds good in theory, but a little homework shows that index quality varies wildly. If you want to invest in water - this is not the way to do it.

The latter two ETFs on the list look a better –but I haven’t done enough due diligence on them. Remember: the water sector is a tough one in which to invest (most of the best companies are buried inside big conglomerates. As such the remaining pure-play water companies are typically pretty lousy while the water utilities typically struggle to earn their cost of capital.