danno

Smart Investing in the Smart Grid

Nice article, but I have some issues here.

Many of the utilities and ISOs in particular, have been real foot draggers when it has come to smart grid, competition, de-coupling, etc. which are key issues here. I'm not sure I'd like to be investing in utility industry particularly with its legacy "we're still a monopoly so screw the customer" mentality. Also any rate increases still need political approval which is a real political hot potato.

I am an investor in PZD, and it doesn't have or hasn't had investments in "tiny biofuel companies" for long time. If it did, I'd probably dump it. So you are off the mark on that description.

I would think the best pure plays of public companies for smart grid are Telvent and MYR Group. Otherwise what I see is a business that will be dominated by giants like ABB, Siemens, Honeywell, GE, Schneider, IBM, Johnson Controls, Cisco, etc. but the best technology is still with many non-public companies like Silver Spring Networks, Fat Spaniel, BPL, C-Powered, Eka Systems, etc.

That said, I wouldn't want to bet on any of the public companies individually, because they are very diversified and don't have enough exposure overall to the Smart Grid. PZD seems to have the highest exposure to this "sector", at about 12% or so, but I think it avoids companies in industries that are doomed, too. such as grain-based fuels and "clean coal". I think that it's easier to outperform by avoiding investing in what you know is doomed and focusing on sectors that you know will do well such as smart grid, energy efficiency, or water purification technologies. Avoiding the dogs is half the game, and there don't seem to be too many dogs in smart grid, yet.

Comparing Green Energy ETFs

OOPS.

What I meant to say is that a good Index should NEVER have lousy companies unless...

Sorry about that.

On Oct 19 09:00 AM danno wrote:

> Actually, a good Index should have lousy companies in them, unless
> it is a sector or composite Index. When companies go bad, they are
> replaced. DJ 30 Industrials is a good example. Moreover, some of
> the better ETFs really offer is intelligent indexing that is most
> of the benefits of a mutual fund through and active selection process,
> but then passive index management to avoid market timing, capital
> gains distributions, and high fees. Since very fund managers (and
> only a tiny percentage of individual of investors) can beat the market
> with any regularity on a risk-adjusted basis (especially when you
> adjust for fees) it's very questionable, in my mind, that actively
> managed funds or individual investors are going to beat the indexes.
>
>
> What smart investors can do, is:
> a) Asset allocation and diversification
> b) Pick the very best index-based funds.
> c) only invest their "play money" in individual stocks, short-term
> investing, and other speculative stuff.
>
> This is not fun to hear, very humbling, and doesn't sell books and
> TV shows, but it does allow investors to get good returns, and get
> on and enjoy the rest of their lives.
>
> The one exception is when investors really know an industry or company
> very, very well. Then sometimes, they can beat the street, but that
> means a lot of work and specialized knowledge since there are often
> many insiders and street analysts who follow the same companies very
> closely and get paid to do it (so they spend many, many hours following
> the company, its peers, and meeting with management. That's a tough
> edge to beat. It doesn't always mean their advice is great since
> they often cannot publish what they really think.

Comparing Green Energy ETFs

Actually, a good Index should have lousy companies in them, unless it is a sector or composite Index. When companies go bad, they are replaced. DJ 30 Industrials is a good example. Moreover, some of the better ETFs really offer is intelligent indexing that is most of the benefits of a mutual fund through and active selection process, but then passive index management to avoid market timing, capital gains distributions, and high fees. Since very fund managers (and only a tiny percentage of individual of investors) can beat the market with any regularity on a risk-adjusted basis (especially when you adjust for fees) it's very questionable, in my mind, that actively managed funds or individual investors are going to beat the indexes.

What smart investors can do, is:
a) Asset allocation and diversification
b) Pick the very best index-based funds.
c) only invest their "play money" in individual stocks, short-term investing, and other speculative stuff.

This is not fun to hear, very humbling, and doesn't sell books and TV shows, but it does allow investors to get good returns, and get on and enjoy the rest of their lives.

The one exception is when investors really know an industry or company very, very well. Then sometimes, they can beat the street, but that means a lot of work and specialized knowledge since there are often many insiders and street analysts who follow the same companies very closely and get paid to do it (so they spend many, many hours following the company, its peers, and meeting with management. That's a tough edge to beat. It doesn't always mean their advice is great since they often cannot publish what they really think.

Comparing Green Energy ETFs

Dear Dr. Konrad:

If you look at the history of the holdings of some of these ETFs you'll realize that many of them have managers that don't know squat. Of course the managers are learning, but investors are paying them to learn at their own expense.

I don't know why you waste your ink on stuff like the cleanedge ETF, PBW, or PBD or many of their peers including the water funds. The strategy behind so many of these indexes looks like something my assembled by a kindergarten class. The funds grab deep in shallow industry niches and pick up a lot of crappy companies. Ever see a good publicly-traded fuel cell company? Funny, I haven't either. What exactly does this "index" track, anyhow?

Sometimes the indexes/ETFs pick companies that are anything but green (corn ethanol, "clean" coal, polluting coal plants anyone?), or companies that have tiny or exposure to the sector, demonstrates that they are either run by the incompetent for the incompetent/lazy investor or they are products just out to earn a quick buck. Obviously it's both of the above.

Did anyone out there ever notice that some of these indexes/ETFs have 6%, 10%, 15% or even 20% of their holdings in one stock? The arbs and hedge funds sure have. Ever see what happens when an index owns 100-270 days average trading volume of one stock when the quarterly/semiannual/a... rebalance happens? The arbs get several days to take the ETF investors to the cleaners. Maybe that's the cleanest thing about some of these funds.

Or the indexes hold stocks that are either super illiquid or trade on some exchange that's closed to foreigners investors (like us Gai-jin) so that the ETF can't actually track the index properly.

If you want narrow focus on green/clean energy pick up a solar or wind ETF for the short-term directional volatility. For the long run, investors and writers should do their home work and look at more than just fees.

Who's running these things ? Mickey, Goofy, or Pluto? People work really hard to save their money - so they should work just as hard to do their homework before then invest it. IMHO, I would recommend that you do much more extensive research before further pontification in this investment arena where quality products are few and far between.

Green Stocks: A Better Way to Play?

Okay


On Sep 28 04:06 PM Tom Konrad wrote:

> Danno,
>
> 1) This is not cherry-picked data... this portfolio was designed
> to be a track the mutual funds at lower cost with more tax efficiency.
> It did not work that way; why I'm trying to do now is figure out
> why. The risk adjustment you suggest is what I'll be looking into
> in the second article in the series. Other adjustments will follow
> if that does not prove sufficient explanation.
>
> a,b, and c) Please read the original article where I constructed
> the portfolio (Click on the very first link in the article), and
> you will understand how all the stocks you object to got there: They
> were selected from the portfolios of the mutual funds I'm comparing
> them to.
>
> 2) I don't know how you can disagree with my analysis, since my analysis
> was "This portfolio outperformed and I'm not sure why, but I'm hoping
> I'm on to something." I have not shown anything yet, except that
> I've stumbled across something worth looking into.

Green Stocks: A Better Way to Play?

I am very skeptical of Dr. Konrad's analysis.

1) To compare returns without adjusting for risk (not to mention management fees, or taxes is foolhardy, at best. A CFA should know better than that.

- The mutual funds are tax-inefficient, have high management fees, and less liquid, and rarely beat the indexes.

- One could have bought a Russell 3000 ETF or other similar Indices and gotten similar returns at lower risk and cost, or it one wanted to stay consistent with the green theme, bought PZD and still taken less risk and earned about 60% ROI.

- Dr. Konrad's inclusion of non green or alternative energy companies certainly undermines his claims as well.

a) SJI - South Jersey is predominantly a regulated energy utility - nothing green about that rate hikes and demand are what drives its profits.

b) what on earth is Citrix doing here? Is this a typo?

c LXU: LSB Industries is still first a manufacturer of bulk chemicals, many of them very nasty. It has a hydronic and ground-source heat-pump business, but it's not a very "clean or green" company

3) Playing such short-term movements is not really investing, but rather trading or speculating. Dr. Konrad hasn't shown us any long-term outperformance, but rather cherry-picked data.

ETF Investments Ahead of G20

For long-term investors, it seems to me that GWO, DSI and PZD are all much better ETFs to play this theme than volatile stuff like TAN, or poorly conceived ETFs like GEX and PBW. It's a long term play. Of course if you want short-term movement, then I'd be all over FAN, PWND, and KWT. Either you trade to play short-term movements (under 12-months, and usually under 3-months) or one invests for the long-haul. The narrow-sector funds are lousy long-term bets, and the long-term themes don't give you the volatility to make bets on short term direction.

Coming Clean with ETFs Is More Important than Ever

Hard to believe that ICLN is called Clean Energy.

With companies like Endesa owning and building new coal-fired power plants, and Covanta with its dirty burns, airborne toxics, and lobbying against more recycling, this is kind of a joke. ICLN has held even worse stocks in the past. A little due diligence shows this index and fund to be another slick marketing sham.

Not All Alternate Energy ETFs Were Created Equal

Yes, they are not created equal. Most of those funds are worse than the next - though GEX is alright. One would be better off with GEX or the Clean Tech ETF: PZD or using some of the pure-play Solar or wind index funds (FAN, as a way to trade. AECOX isn't a bad idea either same for the Winslow Green Growth... The products that Morand is talking about have held some real trash in the past and makes one doubt their management.

Green ETF Investors Hopeful as Obama Takes Office

PWND and PZD are both probably better choices than what this guy's recommending. I mean that Elements stuff is quantitative gobbledygook masking vapid strategy.

Wind Energy ETFs Blowing Our Way

what kind of "Index" would have >13% in 1 stock? that's just plain moronic.

Choosing the Best Industry ETFs

Given her recommendations, she obviously hasn't done enough evaluation of these ETFs especially beyond the prospectus. Does she understand the weighting models, the actual companies, etc? No. Does she look at the history and gaffes of what these funds have in their portfolios? No. Does she understand the rules and risk management approaches of these indexes? No. I say that because if she did, she wouldn't dare recommend half of these ETFs. Saying that you've done your homework is one thing. Actually doing it is another thing. As the teacher, I'd give her homework a grade of 'D'.

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.