On our part, we would like to draw investors’ attention to the clean energy space that crumbled last year due to the oil price collapse. However, the commitment to the planet is building positive momentum once again this year (read: Greener Days Ahead for Clean Energy ETFs?).
These stocks have shown strength on encouraging trends and some respite to the falling oil prices. This is especially true as the demand for renewable sources, in particular solar and wind, is growing rapidly for electricity generation across the globe led by China, Europe, the U.S. and Japan.
As per the International Energy Agency (IEA), global energy demand for electricity generation would rise 37% by 2040. Half of the demand will come from renewable energy, overtaking coal as the leading source of electricity. Additionally, the depletion of fossil fuel reserves, new and advanced technologies, and more efficient alternative energy applications have made clean power more viable, injecting optimism into the sector.
Further, Obama’s ‘Climate Change Action Plan’ is the major catalyst in driving growth. The President is seeking a 7.2% increase in clean energy funding for next year. The fiscal 2016 proposed budget includes a $7.4 billion fund for clean energy technologies, higher than $6.5 billion enacted by Congress for this year (read: Obama Budget Plan Drives Up These Sector ETFs).
Added to the strength is the historic treaty between the U.S. and China at the end of last year on the new climate change plans, wherein Obama vowed to reduce greenhouse gases faster than before while China decided to cap carbon emissions for the first time.
Moreover, the tech giant Apple (AAPL) has made a big entry to the green energy space by collaborating with U.S. solar-panel manufacturer behemoth First Solar (FSLR). All these moves would definitely take the space to new highs in the coming years but short-term prospects look dim (read: Will Solar ETFs Shine on Apple-First Solar Deal?).
Given this, the space deserves a closer look at ‘Earth Hour’. We have highlighted three popular clean energy ETFs that should benefit most from the the surging renewable space over the long term.
PowerShares WilderHill Clean Energy Portfolio Fund (PBW)
This product follows the WilderHill Clean Energy Index and holds 53 U.S. stocks in its portfolio. It is well spread out across various securities as each make up for less than 3.6% of total assets. UUniversal Display (OLED), Canadian Solar (CSIQ), and Trina Solar (TSL) are the top three elements in the basket. From a sector look, the focus is on information technology firms (42.5%), but industrials and utilities also receive double-digit allocations.
The fund has amassed $143.2 million in its asset base and sees good volume of more than 144,000 shares a day. Expense ratio came in at 0.70%. The ETF returned 5.7% in the year-to-date period.
First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN)
This fund tracks the Nasdaq Clean Edge Green Energy Index and manages assets worth $90.3 million. It charges 60 bps in fees per year while volume is good at nearly 56,000 shares (see: all the Alternative Energy ETFs here).
In total, the product holds 46 securities and Linear Technology (LLTC), Tesla Motors (TSLA) and SunEdison (SUNE) occupy the top three positions with 7% each. From a sector look, more than one-third of the portfolio is dominated by technology while oil & gas, industrials and utilities round off the next three spots with the double-digit exposure. QCLN has added 7% in so far this year.
Market Vectors Global Alternative Energy ETF (GEX)
This ETF tracks the Ardour Global Index, focusing on global companies that are primarily engaged in the business of alternative energy. The fund holds about 31 stocks in its basket with AUM of $83.4 million while charging 62 bps in fees per year. Average daily volume is paltry under 10,000 shares per day on average. American firms dominate the fund’s holding at 60.3% while China (11.1%) and Denmark (10.2%) round off the top three (read: A Primer on Alternate Energy ETFs).
The product is tilted towards the top two firms – Vestas Wind Systems (VWDRY) and Eaton Corp (ETN) – making up for nearly double-digit allocation. From a sector perspective, industrials take the largest share with 47.4% followed by information technology (30.2%) and utilities (10.9%). The ETF is up 6.3% in the year-to-date timeframe.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report PWRSH-W CL EGY (PBW): ETF Research Reports NASDAQ-CL EDG G (QCLN): ETF Research Reports MKT VEC-GLBL AE (GEX): ETF Research Reports TESLA MOTORS (TSLA): Free Stock Analysis Report TRINA SOLAR LTD (TSL): Free Stock Analysis Report CANADIAN SOLAR (CSIQ): Free Stock Analysis Report SUNEDISON INC (SUNE): Free Stock Analysis Report APPLE INC (AAPL): Free Stock Analysis Report FIRST SOLAR INC (FSLR): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
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