For Immediate Release
Chicago, IL – March 21, 2012 – Today, Zacks Investment Ideas
feature highlights Features: PowerShares Cleantech
ETF ( PZD). First Trust NASDAQ Clean Edge Smart
Grid Infrastructure Fund ( GRID) and Global X
Lithium ETF ( LIT).
3 ETFs for the ‘Energy Efficiency’
Boom
With a modestly improving economic environment, it appears as
though businesses are slowly starting to hire while consumers are
once again opening up their pocketbooks. While this trend has led
to some optimism across the economy, one downside to this increased
demand from a variety of sectors looks to be in the commodity
world.
A number of products have seen rising prices so far this year
with some of the biggest gains coming in the energy world. Oil
prices are now firmly above $100/bbl. while coal, heating oil, and
RBOB have all seen price increases in the first part of the year as
well.
If these positive economic trends continue, high prices in this
segment could be in the beginning of a bull market, if not at the
very least poised to stay at elevated levels for the time being
(see Inside The Forgotten Energy ETFs).
This development could boost demand for those engaged in the
exploration and production of new fossil fuel areas as higher
prices make fields that were once off limits profitable again.
Another end result of this trend could be renewed interest in
alternative fuels such as wind and solar power.
These energy forms tend to be much more competitive with their
‘traditional’ cousins when prices are high in the hydrocarbon
world, spurring some to make the switch to clean energy. Yet, while
exploration for new deposits and the broad clean energy sector look
to be winners, investors could also see huge gains in stocks that
promote energy efficiency as well.
Companies in this segment could be key components in a time of
high energy prices, helping to stretch supplies in all forms of
energy. By utilizing these techniques offered by some firms in this
corner of the market, companies can cut down on costs and possibly
become more profitable in the process. Seemingly, a commitment to
energy efficiency by power intensive businesses could be a
competitive advantage in times of high prices (read Three ETFs For
An Iranian Crisis).
As a result, it could be ideal for some investors to consider
making a play on this space for investment. While it is true that a
move into broad clean energy or oil firms could be another way to
play high prices, both of these sectors look to be among the first
places that investors target with their capital in times of rising
energy prices, suggesting that energy efficiency firms may be
overlooked in comparison.
Thanks to this, valuations in this corner of the market may be
more tolerable at this time than most other plays on the growing
trend. Furthermore, the sector looks to be less volatile, and more
profitable, than many in the alternative energy space while also
offering more growth than many oil firms, implying that it could be
the best of both worlds if energy prices remain elevated.
For investors intrigued by these trends, any of the following
three ETFs could make for intriguing selections that could possibly
benefit from a boom in demand for energy efficient technologies and
processes:
PowerShares Cleantech ETF ( PZD)
For investors who are unsure of which segment of the sector is
going to perform the best, an ETF targeting the entire space could
be the best bet. In order to do this and make a play on emerging
technologies that could be useful to those looking to increase
energy efficiency, PZD is hard to beat.
The product tracks the Cleantech which focuses in on firms
that primarily engaged and involved in electric grid, electric
meters and devices, networks, energy storage and management, and
enabling software used by the smart grid infrastructure sector.
With this focus, the fund should be a solid barometer for the
health of the industry at large (see Follow Buffett Into Clean
Energy With These Solar ETFs).
PZD holds just under 70 securities in total, putting a heavy
weight in industrials (54%) and technology (30%) companies. From a
market cap perspective, the product is pretty well spread out,
allocating about 38% to small and micro cap securities, 37% to mid
caps, and the rest in large cap stocks.
Top individual securities include European firm Schneider
Electric and others which make up around 3.1% of the total holdings
profile. This fund was down significantly in 2011, but as the
economy has rebounded and energy efficiency has come into focus,
the product has produced strong gains, adding nearly 12% so far in
2012.
First Trust NASDAQ Clean Edge Smart Grid Infrastructure
Fund ( GRID)
According to recent research, more than half of all energy
produced in the U.S. is wasted thanks to inefficiency in the power
system. Given that the U.S. produces over 4,300 TWh of power per
year, this is clearly a huge area of improvement for those seeking
to increase the use of energy efficient technologies.
For investors seeking to hone in on this potentially high growth
segment the aptly named fund GRID could be an intriguing choice
(read Utility ETFs: Slumping Sector In Rebounding Market).
The product tracks stocks that are in the grid and electric
energy infrastructure sectors, holding 36 securities in total. GRID
focuses in on companies primarily engaged and involved in electric
grid, electric meters and devices, networks, energy storage and
management, and enabling software used by the smart grid
infrastructure sector.
The ETF also tilts holdings, 80/20, towards pure play companies,
ensuring that more diversified companies are represented but do not
dominate the . Top individual holdings include NGK Insulators,
ABB Ltd. (ABB) and Schneider Electric, each of
which make up about 8% of the total. Much like the other ETFs on
this list, the fund had a rough 2011 but has seen a rebound in 2012
gaining close to 14.8% since the start of the year.
Global X Lithium ETF ( LIT)
Some investors may be scratching their heads wondering what a
basic materials play like LIT is doing in an article about energy
efficiency, but lithium is an increasingly important story in the
space as well. That is because lithium is a key component in many
electric batteries which are vital to electric cars, consumer
electronics, and industrial applications. As alternative energy
takes off, efficient and clean ways to store this power will be
needed, and lithium looks to easily take over this role (see Ten
Best New ETFs of 2011).
In terms of holdings, LIT has 22 securities in total, giving
heavy weights to Chilean firms, among others. For sectors, metal
and mining takes up about 26% while agricultural chemical firms 19%
and electrical equipment 19% companies round out the top three
sectors.
Investors should also note that the fund has a focus on mid cap
securities, which is unlike many basic materials focused funds
which seem to have a definite large cap tilt. In part thanks to
this, the fund has had a weak 2011 but it has roared higher in
2012, gaining about 16.6% so far this year.
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