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rafael
3 Comments
Alt. Energy: More Technology Than Energy?
Energy, Smallcaps Lead Pre-Holiday Rally
I have noticed that PZD (The PowerShares Cleantech Portfolio) was excluded from the list of top performers despite the fact that PZD outperformed at least one of the ETFs (WMH) listed. Last week, PZD rose 3.22% (the appreciation from the previous Friday’s adjusted close and the correct way to measure weekly price appreciation, period). So looking at the graph and checking the numbers, it’s clear that the returns for IJR and SLV were understated and those for WMH were overstated. I didn’t check the rest but when one find three errors in such a small sample population, it’s safe to say that the data set should be abandoned post haste. FYI, none of the ETFs I mentioned had distributions last week.
My one caveat is that my data source is Yahoo Finance, which in my experience, has had erratic data quality (especially with regard to data sourced from Capital IQ), but has been better on price data.
ETF Update: Waiting On China's Currency Release, Less Than Green ETFs, Getting ETFs Into 401(k)s
1) PZD currently has a small weighting in CREE (under 2% as I write this). How this gets characterized as a ‘large weighting’ is beyond me.
2) PZD currently has about a 5.5% weighting in First Solar - NOT the 15% Mr. Lydon suggests.
3) Clean energy stocks currently account for about 28% of the Cleantech Index and hence, PZD. The Cleantech Index covers the broad spectrum of clean technology businesses from water, to new materials, sustainable agriculture, transportation, and of course, energy efficiency (including those that improve the efficiency of, and reduce the pollution from, carbon-based fuels which Mr. Lydon contends will remain critical for a long time to come.
4) The PowerShares ETFs Mr. Lydon mentions, PZD and PBW, have very different strategies in terms of composition, weighting & risk management, focus, screening criteria, etc. While there is some portfolio overlap, it tends to be exaggerated prior to quarterly rebalancing - especially when a particular sector common to both is hot (e.g., solar), but the weightings are far different.
In the case of solar, PBW currently has just over a 40% weighting in solar stocks, while PZD has 22.7% in solar. Just after the Q3 rebalancing, the Cleantech Index (and hence, PZD), had a solar weighting of about 16% - whereas Wilderhill’s Clean Energy Index was about 25-29%. Naturally, heavy sector weightings tend to be most pronounced just before rebalancing when winners are pruned back.
Finally, most solar stocks have tended to trade quite similarly. Over time, I would expect greater divergence in their fortunes and, I hope, a greater number of more discerning investors (how scarce they are). Since PZD and PBW only have about 50% overlap in their solar stocks and use different weighting schemes, I would expect the weighted overlap to decrease over time.