Monday, March 31, 2008

Investing in Alternative Energy Funds

Two stories, the first is from the Wall Street Journal:

Clean-Energy Funds

First Solar (FSLR) has been one of the hottest stocks of the past 12 months. In 2007, this solar- panel manufacturer saw a 40-fold increase in profit, and euphoric investors have celebrated by pushing it to a recent $229 a share from a 52-week low of $51.50.

It wasn't too long ago that so-called clean-energy stocks like First Solar were considered fringe players. But as consumers and even chief executives grow tired of paying record gas and oil prices and contemplating the ramifications of global warming, there's been a sea change in the attitude toward these alternative investments.

The exchange-traded funds industry has long seen that potential. Over the past three years, it's launched a half-dozen funds that give shareholders exposure to solar and wind companies, energy-technology firms and infrastructure plays. For the most part, these funds have been decent investments.
PowerShares WilderHill Clean Energy (PBW), the grandfather of the group, returned an impressive 59% last year.

These funds have not been immune to the economic concerns weighing on the stock market, however. After its impressive gains last year, PowerShares WilderHill is down about 28% this year, while PowerShares Global Clean Energy fund (PBD) has fallen 19% and Market Vectors Global Alternative Energy (GEX) is down 21%

Nevertheless, the industry is still attracting a wide range of investors. Some, like J.D. Steinhilber, founder of Agile Investing in Nashville, have built small 3% positions to help diversify larger portfolios....MORE

And, from Hard Assets Investor:

Here Come The Suns

With the tremendous interest in all things "green" and "clean," it was just a matter of time before ETF and index companies would start to carve out thinner slices of the clean tech universe. In fact, there are two ETFs in registration that target a fast-growing segment of the clean tech market: solar energy.

This month, Claymore and Van Eck registered solar energy ETFs. Claymore's Global Solar Energy ETF will track an index developed by Chicago-based Melvin & Company. The index will be composed of approximately 25 stocks selected "based on the relative importance of solar power within the company's business model." The stocks in the index are involved in some aspect of the solar power business, from gathering raw materials to manufacturing equipment to selling solar energy. Components will be weighted based in part on the importance of solar energy to their business model, so that pure-play companies get more weight than conglomerates that dabble in solar energy.

Van Eck's Market Vectors-Solar Energy ETF will track the Ardour Solar Energy Index. Expected to launch in April 2008, the ETF will contain approximately 25 stocks, selected depending on the companies' revenues, liquidity and market cap. The list of companies isn't available, but the roughly 25 stocks will be taken from Ardour's Global Composite Index, an alternative energy index comprised of 118 stocks. Both ETFs will likely have familiar names, such as major solar energy companies like First Solar (NASDAQ: FSLR), Sun Power (NASDAQ: SPWR), Evergreen Solar (NASDAQ: ESLR) and LDK Solar (NYSE: LDK).
Bullish On Solar

Van Eck and Claymore are counting on solar to generate strong investor interest in the coming years, and for good reason. There seems little doubt that the solar-power industry has a "sunny" future. In January's Scientific American, "A Solar Grand Plan" proposes a way for the U.S. to generate 69% of its electricity and 35% of its total energy from solar power by 2050. Noted technologist and inventor Ray Kurzweil is even more bullish, forecasting that solar will meet 100% of our energy needs in 20 years. Solar currently generates far less than 1% of our energy needs. ...MORE