This podcast and video is for informational use only.  We are not making investment recommendations.  This is not an appropriate investment for everyone.  As with any investment, please read the prospectus and discuss it with your financial planner.

Why Invest in Alternative Energy

Alternative energy can be part of a diversified investment portfolio – but it should just be a small part.

Energy and utilities make up about 9% of the S&P 500. If you already have a diversified portfolio with exposure to alternative energy, you may not want to over expose your position too much.

The thought in investing in alternative energy companies is to invest and grow the investment with the growth of the alternative energy industry.  Which considering climate change, is a promising industry.  Although with the current administration, the industry may grow slowly.

Your investment in alternative energy should not be thought of as supporting alternative energy.  The companies already received their money during the initial public offering.  If a companies stock is over-priced or under-priced, other investors will push it towards its fair market value with their decisions.  The market is very efficient.

Investment Types

  • Mutual Funds – a pool of money invested in securities such as stocks, bonds, money market instruments and other assets. The expense ratio of the percentage that is paid to the fund for commissions, administrative costs, compliance, advertising, management fees, etc. This percentage directly reduces your gains (or increases your losses).  Mutual funds, generally, have significantly larger expense ratios then ETFs.
  • Exchange Traded Fund (ETF) – a fund that holds the asset it tracks. That asset may be stocks, bonds, gold or other commodities, or futures contracts. The expense ratio is generally lower than for mutual funds.
  • Exchange Traded Note (ETN) – Like a bond. It’s an unsecured debt note issued by an institution.
  • Individual stocks – invest directly with a company

Investment Options

The following three tables show some investment options that are: ETFs, Mutual Funds, and Individual Stocks.  The tables show the name of the investment, ticker, category or industry, 1 year total return, annualized 5 year return, and the expense ratio.

Table 1: Alternative Energy Exchange Traded Funds (ETF)

NameTickerCategory – Industry1 Yr ReturnAnnlzd 5 Yr ReturnExpense Ratio
VanEck Vectors Global Alt Energy ETFGEXEnergy Sector-1.885.010.67
iShares MSCI ACWI Low Carbon Target ETFCRBNUS Fund World Large Stock9.290.20
iShares Global Clean Energy ETFICLNEnergy Sector1.691.960.47
Invesco WilderHill Progressive Engy ETFPUWEnergy Sector0.72-1.001.05
Invesco WilderHill Clean Energy ETFPBWEnergy Sector11.75-1.030.77
Invesco Solar ETFTANEnergy Sector8.80-1.370.76
Invesco Global Clean Energy ETFPBDEnergy Sector-0.594.070.75
Invesco Cleantech™ ETFPZDEnergy Sector8.7610.640.68
Global X YieldCo ETFYLCOUS Fund Utilities0.060.65
First Trust NASDAQ® Cln Edge®StGidIfsETFGRIDEnergy Sector11.409.550.84
First Trust NASDAQ® Cln Edge® GrnEngyETFQCLNEnergy Sector4.986.140.66
First Trust Global Wind Energy ETFFANEnergy Sector0.7311.220.71
iPath® Global Carbon ETNGRNUS Fund Commodities Energy264.2133.650.75

 

Table 2: Alternative Energy Mutual Funds

NameTickerCategory – Industry1 Yr ReturnAnnlzd 5 Yr ReturnExpense Ratio
Shelton Green AlphaNEXTXUS Fund Mid-Cap Growth-2.086.901.30
New Alternatives ANALFXUS Fund World Small/Mid Stock-2.248.451.07
Guinness Atkinson Alternative EnergyGAAEXUS Fund Foreign Small/Mid Value2.72-3.062.74
Firsthand Alternative EnergyALTEXUS Fund Technology3.503.942.15
Calvert Global Energy Solutions ACGAEXUS Fund World Small/Mid Stock2.201.281.94

 

Table 3: Alternative Energy Individual Stocks

NameTickerCategory – Industry1 Yr ReturnAnnlzd 5 Yr ReturnExpense Ratio
TerraForm Power IncTERPUtilities – owns and operates solar and wind facilities5.88NA
SolarEdge Technologies IncSEDGSolar140.58NA
Pattern Energy Group IncPEGIUtilities – Independent Power Producers-22.24NA
Ormat Technologies IncORAUtilities – geothermal energy-10.6617.55NA
NRG Yield Inc CNYLDUtilities – Regulated Electric3.11NA
InfraREIT IncHIFRREIT – Diversified13.81NA
First Solar IncFSLRSolar15.582.05NA
Covanta Holding CorpCVAWaste Management28.62-0.16NA
Canadian Solar IncCSIQSolar-24.91-0.97NA
Atlantica Yield PLCAYUtilities – Regulated Electric1.98NA

TerraForm Power owns and operates wind and mostly solar power producing facilities located in the U.S., Canada, the United Kingdom, and Chile.

SolarEdge Technologies designs and sells direct current (DC) optimized inverter systems for residential and commercial solar photovoltaic (PV) installations.

Pattern Energy Group is an independent power company that owns and operates wind power projects located in the U.S., Canada, and Chile.

Ormat Technologies develops, builds, owns, and operates geothermal and recovered energy-based power plants; and sells electricity worldwide.

NRG Yield acquires, owns, and operates contracted renewable and conventional generation, and thermal infrastructure assets (steam and chilled water) in the United States.

InfraREIT owns and leases rate-regulated electricity transmission infrastructure assets in Texas.  They include power lines, substations, transmission towers, transformers and related property and assets.

First Solar provides photovoltaic solar energy components and systems in the United States and internationally.

Covanta Holding provides waste and energy services including waste transport and disposal, and other renewable energy production businesses to municipal entities primarily in the United States and Canada.

Canadian Solar designs, develops, manufactures, and sells solar ingots, wafers, cells, modules, and other solar power products.

Atlantica Yield acquires, owns, and manages renewable energy natural gas, power, electric transmission lines, and water assets in North America, South America, Spain, Algeria, and South Africa. 22 assets, including 1,446 megawatts (MW) of renewable energy generation assets comprising solar power and wind plants.

Observations

As can be comparing Tables 1 and 2, the expense ratios of the ETFs are lower than the expense ratios of the mutual funds.

The volatility of holding on individual stock versus holding a fund of many stocks is higher.

 

 

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